§ 5.5 pm
§ The Secretary of State for Employment (Mr. David Hunt)
I warmly welcome my right hon. and learned Friend the Chancellor's statement. He has emphasised the progress already made towards our central goal—the achievement of sustained non-inflationary growth. We have not wavered from that goal in difficult times, and we shall not depart from it now, especially as recovery is so well under way.
My right hon. and learned Friend is to be congratulated on the skill with which he has constructed his first Budget. I am especially pleased that he has enabled me to announce today the details of our new scheme for apprenticeships and credits, in which I am pleased to say that my Department will invest £1.25 billion over a three-year period, in addition to expenditure of £900 million on youth training over the same period.
Training is not some homogeneous good to be hurled indiscriminately at young people. To be really worth while, it must be based on mutual responsibility and a high level of motivation. In the social market economy, both employers and employees should take clear responsibility for their development. Training is in the best interests of the individuals who receive it, and it is in the best interests of the companies that employ them, which is why industry's investment in training held up so well during the recession.
However, we can always do more to strengthen the incentive to train and to reaffirm the key mutual commitment between the trainee and the employer, so today I want to give details of our plans to introduce a system of new modern apprenticeships.
To remain competitive, our industries need an increasing number of people qualified to the key technician and supervisor levels. They, in turn, need high-quality work-based training, to defined standards; in other words, we want all the good features of traditional apprenticeships leading to a recognised qualification, and modernised to avoid time serving. 1193 I am today inviting training and enterprise councils to prepare to offer a full range of modern apprenticeships to young people in all parts of the country. I am also asking them to prepare to offer youth credits to all young people who leave school at 16 or 17 by 1995, so that credits will be the mechanism to give young people access to modern apprenticeships, as well as to other forms of work-based training.
I am also inviting industry training organisations to work up model schemes of training to national vocational qualification level 3 or above. As the House will know, that is equivalent to A-level standard. Those schemes will describe what young people can expect to achieve and set out clearly the milestones on the way to becoming qualified.
I want apprenticeships to be developed in all sorts of sectors and occupations. Of course, we need modern apprenticeships in engineering. We want electronics and mechanical engineering skills to be brought together, for example. We also want new, modern apprenticeships in areas such as financial services, in hotel and leisure management, in catering, in distribution, in the care sector and in science-based technology industries such as biotechnology. We want apprenticeships in information technology, as it applies across a whole range of sectors and right across the chemical, petrochemical and plastics industries.
I also want to involve small and medium-sized employers as well as big employers. I want to see apprenticeships offered equally to young women as well as to young men. The modern apprenticeship needs to be open to every young person to whom it would be of benefit. I want every apprentice to sign an apprenticeship pledge with an employer. That will clearly set out the training the apprentice can expect to receive, and what, in turn, the employer will expect by way of progress and it will enshrine the commitment of each party to see the training through to successful completion. Ideally, it will set out an intended path to a job once the apprenticeship has been successfully completed.
I want to see apprenticeships on offer to the school leavers of 1995 and I want to be able to run pilot schemes in 1994. That will be a challenge because there is a great deal of work that needs to be done and many people will need to play a part. Today, I have written to invite all the main organisations to come in for consultations, including, of course, the national council of the training and enterprise councils and the Confederation of British Industry. I have written to the Trades Union Congress, the National Council for Education and Training Targets and the National Council for Industry Training Organisations. I look forward to receiving their views and also to seeing the first training models that industry will develop in consultation with my Department as soon as possible.
§ Mr. John Prescott (Kingston upon Hull, East)
Is the Secretary of State admitting a failure in Government policy on apprenticeships, because in 1979, according to his Department's figures, there were 367 proper apprentices, as he describes them, and in the past year there were 240, after he had dismantled 26 training boards? Was that a failure of policy and is the right hon. Gentleman attempting to correct it in a "back to basics" approach?
§ Mr. Hunt
No, I am not. I do not accept that at all. I do not want to engage in a negative discussion. I could describe in graphic terms how the old, male and trade union-dominated apprenticeship system was destroyed, but I shall not look to the past. If the only area of disagreement between myself and the hon. Gentleman is to be the past, then I look forward to the future with him. I noticed that the hon. Member for Stretford (Mr. Lloyd) spoke in the debate on national education and training targets and I have made it clear that I am prepared to extend the same invitation to him and his colleagues so that we can talk through how best to introduce the new, modern system of apprenticeships. I also extend that invitation to the other parties.
Instead of looking back, we can look forward. Thanks to the labour market flexibility, we can look forward with much more confidence than ever before. I believe that the atmosphere is right for an initiative of that sort and I invite all-party agreement on that point.
§ Mr. David Madel (Bedfordshire, South-West)
My right hon. Friend referred to the employers' responsibility in the welcome work-based training opportunity for young people. If an employer runs into financial difficulty and cannot run the training, is there to be a back-up system whereby work-based training can be resumed elsewhere?
§ Mr. Hunt
I am setting out the framework and funding of the scheme today. I am perfectly prepared to state clearly that the Government will invest £1.25 billion in credits and apprenticeships over the next three years. Obviously, it will now be up to employers to respond with the detailed structures that they believe best suit their industries and companies.
My hon. Friend the Member for Bedfordshire, South-West (Mr. Madel) raised one special problem which I will, of course, consider, but I cannot hold out any hope of immediate alleviation of that problem because we want the maximum number of apprenticeships to be agreed with industries and employers. It is up to them to come forward with the way in which they would like to proceed.
It may help my hon. Friend to know that I expect that the new programme will build up to about 150,000 apprentices in training at any one time under the new, modern apprenticeship system. The financial settlement that my right hon. and learned Friend the Chancellor has allowed gives a real increase in the funds available. Our average investment in guidance and training for young people will rise in real terms by 25 per cent. over the three years. That is a measure of the importance that we attach to apprenticeships in a tough year for public expenditure. Like health and education, training is a clear priority for the Government.
My right hon. and learned Friend's Budget has already resulted in several messages of support, including a telephone call from the new director general of the Engineering Employers Federation which represents 5,000 engineering companies. He welcomed the announcement ofmodern apprenticeships that are linked to achievements and competencesand I believe that his view is echoed across the country. I look forward to working with others who are keen to make the new apprenticeships a success.
§ Mr. Alex Carlile (Montgomery)
So that the House can assess the right hon. Gentleman's apparently welcome announcement, would either he or the Minister replying to 1195 the debate tell the House whether his apprenticeship scheme involves additional spending by the Department of Employment? If that is so, how much will it be and where will the cuts in the Department of Employment's budget come from, as outlined on page 117 of the Red Book?
§ Mr. Hunt
At the moment, there is a rising number of young people staying on at school—a few years ago, the figure was 48 per cent. and it is now 71 per cent. As a result, the youth training programme is declining substantially and it is underspending this year, as I have just revealed in a parliamentary answer, and is likely to underspend further next year. My right hon. and learned Friend the Chancellor's Budget has allowed me not to impose the cuts which would have obviously followed, but to introduce a new, modern apprenticeship scheme to run alongside the youth training scheme and, in addition, to provide a rising tide of expenditure. That is the simple answer to the hon. and learned Gentleman's question and I am perfectly prepared to invite him and his colleagues to see me to go through matters in more detail.
The key to modern apprenticeships, for which I believe many right hon. and hon. Members on both sides of the House have been pressing, is the qualification to NVQ level 3, which is equivalent to A-level. Provided the scheme is a success—I hope that everyone will work to make it a success, as the preliminary signs are good—we shall see more than 40,000 youngsters on that scheme every year working to NVQ level 3—more than three times the present number in factories, businesses and companies. We have an increasing gap at technician and craft level and we intend to more than meet that need in the economy.
§ Mr. Geoffrey Clifton-Brown (Cirencester and Tewkesbury)
Does my right hon. Friend recognise that the proposal is an investment in our young people for the future which will be of benefit to all businesses for many decades to come?
§ Mr. Hunt
Yes. I agree with my hon. Friend that it is a tremendous investment in the future. It is no use the Labour party trying to downgrade NVQ level 3 to NVQ level 2. We are talking about a new skill target which is the equivalent of A-level. I want 150,000 new apprentices to reach that A-level standard in NVQs as soon as the scheme is up and running. I believe that all hon. Members will recognise the significance of that when they pause to think about it for a moment.
§ Ms Angela Eagle (Wallasey)
Will the Secretary of State comment on speculation in the press today that the cuts in unemployment benefit and the potential gathering together of the administrative arrangements for the payment of income support and of the new job seeker's allowance will lead to the abolition of the Department of Employment, which will make a fundamental difference to the administration of some of the schemes about which he is talking? Has the right hon. Gentleman really co-operated with the Chancellor of the Exchequer to abolish his own job?
§ Mr. Hunt
I am disappointed that my constituency neighbour, the hon. Member for Wallasey (Ms Eagle), should so quickly seek to urge me to do myself out of a job. Any structures within Government are, of course, a matter for my right hon. Friend the Prime Minister. I believe very strongly that the new modern apprenticeship system and the fact that the Department of Employment is right at the 1196 heart of Government economic policy are good indications of the importance that the Government attach to employment and training policies, as I have just said.
§ Mr. Mark Wolfson (Sevenoaks)
Does my right hon. Friend agree, in speaking further on the welcome news, that there is also a social dimension, which will benefit the country, in increasing the number of apprenticeships for young people? What will be the driving force in determining how many people go into particular apprenticeships? Will the job prospect at the end of an apprenticeship be a key factor?
§ Mr. Hunt
I agree with my hon. Friend. The key consideration in the new scheme is the ability to extend it and to spread it to a number of industries that do not have a tradition of apprenticeships as well as to the industries that have. With the old-style apprenticeships, the emphasis was very much on time serving. The emphasis in the new modern scheme is on reaching NVQ level 3, the equivalent of A-level.
Much will depend, to answer my hon. Friend's point, on the models and schemes coming forward. Much will depend on which industries and which employers seize the initiative now and work closely with the organisations involved and with the training and enterprise councils. I shall, of course, talk to the Trades Union Congress about how best to extend those schemes in the way that it feels is right. Bill Jordan plays a key role in NACETT. He has already made it clear that we need such a scheme, which I am happy to discuss with him, if we are to meet the ambitious national training and education targets.
I was also pleased that my right hon. and learned Friend the Chancellor was able to refer in his Budget statement to the fact that unemployment is already down by 137,000 this year. By contrast, I have been asked by a number of my right hon. and hon. Friends whether I will look up the equivalent figures for the rest of the European Union. I can reveal them to the House now. In the past 12 months, unemployment registers in the European Union as a whole rose by 1.6 million. There is only one country in the Community where unemployment is now below the European Union average and falling. That country is the United Kingdom.
§ Mr. Prescott
I am sure that the House is grateful for that information; we welcome any reduction in unemployment. I have looked at the figures for the 14 years under the Government. I must tell the Secretary of State that the number of years for which our figures have been below the European average is three plus one—four altogether. Those are the only times this country has been below the European average level for unemployment.
§ Mr. Hunt
I suppose that that comment makes a change from the comments made by the hon. Member for Holborn and St. Pancras (Mr. Dobson). He used to say that we were fiddling the figures whereas the hon. Member for Kingston upon Hull, East (Mr. Prescott) now says that we are fiddling with figures. However much the hon. Gentleman may try to make a noise in the Chamber, he cannot deny the fact that unemployment in the United Kingdom has fallen by 137,000 this year whereas it has gone up in the resit of Europe by 1.6 million.
Last month, I was able to announce a fall in unemployment of 49,000. In France, Mr. Giraud had to announce an increase of 40,000. In Germany, Dr. Blum 1197 had to announce an October increase of 56,000. Even in Spain, with its smaller population, Mr. Martinez announced an increase of 56,000 in October.
§ Ms Glenda Jackson (Hampstead and Highgate)
The Secretary of State referred to figures. I am sure that he will not dispute figures emanating from the Department of Employment—the quarterly employment estimates for November 1993. The Department says that the number of people in employment had fallen by 508,000 from June 1992 to June 1993, and that in October 1993 the number out of work for more than two years was 42 per cent. higher than in October 1992 and 92.7 per cent. higher than in October 1990.
§ Mr. Hunt
I am not sure why I gave way to the hon. Lady. She omitted to mention two key statistics. I shall answer her question, but I shall then not give way for a little while. The first key statistic is that, last quarter, long-term unemployment fell for the first time in three years by 10,000. Secondly, according to the latest available statistics, the work force in employment rose over the three months by 42,000. That is an upgraded figure.
Let us get the whole matter into context and recognise how right my right hon. and learned Friend the Chancellor was when he reminded the House that unemployment was falling right across the United Kingdom. It is falling in every region of the United Kingdom and it is falling for both men and women. Two thirds of those who become unemployed leave the register within six months. Most welcome of all is last quarter's fall in the number of long-term unemployed people, which I have just mentioned to the hon. Member for Hampstead and Highgate (Ms Jackson). That offers real hope to all unemployed individuals that the misery of unemployment will soon be behind them. The figures are remarkable.
The House may well ask why unemployment is falling at this time. I believe that there are four reasons. First, the recovery started in the first half of 1992. Since then, our gross domestic product has increased for six quarters in succession and it is now up by 2.4 per cent. over the period.
Secondly, the population of working age is stable and there are no longer large numbers of people coming on to the labour market. I remind the House that, over the past 10 years, the number of people in work in the United Kingdom has increased by 1.3 million. There are now 1.3 million more people in work than there were 10 years ago. As output rises, employers take on more staff, and unemployed people are the main source of additional recruits.
Thirdly, the labour market is now much more flexible. Deregulation and curbs on the abuse of trade union power mean that employers have the confidence to recruit people quickly to keep pace with increasing sales and output.
Fourthly, my Department offers more help than ever before to get people back into work. There are now 1.5 million opportunities on offer to unemployed people, and they work. Last month alone, 487,000 people left claimant unemployment, which is the highest monthly figure ever recorded. Those are the reasons unemployment is falling, and in a modern, open economy, by far the best contribution that Governments can make to prosperity is to promote supply-side measures to help industries to be 1198 more competitive. That is why the Department stands centre stage as part of the Government's economic strategy.
We are contributing all the time to job creation through our systematic deregulation and our progress in improving the United Kingdom training system. Continuing to reduce unemployment is a priority in my right hon. and learned Friend's Budget. From next April, the lowest rates of national insurance will fall by a full percentage point, so reducing non-wage costs—already among the lowest in Europe—by £1 billion in a full year. That will benefit all employers.
It is evident in the modern economy that small and medium-sized enterprises are the real engines of job creation. Small firms also need to be encouraged to invest in training their employees. I have, therefore, today announced three new measures to encourage smaller companies to boost their training efforts.
First, I am developing with three high street banks—Barclays, Clydesdale and the Co-op—arrangements for career development loans to be extended to small firms. Firms will benefit from an interest-free holiday during the period of training, and the Government will guarantee the loans. Once the necessary arrangements have been made, loans of up to £125,000 will be available from early in the next financial year.
Secondly, I am giving special help to small firms to achieve the Investors in People standard. I shall remove the requirement on those with fewer than 50 employees to make a matching contribution when working towards Investors in People.
Thirdly, I know that employee development programmes of the kind developed by Ford have proved remarkably successful, giving people control of funds for their training. Many training and enterprise councils are already supporting companies in developing such arrangements. I want TECs to encourage them further, in particular in small companies or groups of companies.
Taken together, the measures form a powerful set of incentives for small firms. They are good news for small firms and they are excellent news for all those who are looking for work.
§ Dr. Jeremy Bray (Motherwell, South)
The Secretary of State has been properly exercised in his office by announcing the new Government policies. Is he aware that when he was talking about announcing unemployment figures he made a slip of the tongue? It is not his job to announce unemployment figures; they are announced by statisticians in his Department. Government statisticians are having the greatest difficulty in re-establishing the integrity of Government statistics and trying to establish that it is not Ministers who are constantly cooking the books. Will the right hon. Gentleman therefore make it clear that it was not he who announced the unemployment statistics, but the statisticians in his Department?
§ Mr. Bruce Grocott (The Wrekin)
The Secretary of State said that the key reason for what he described as the "improving" position is the increased flexibility of the labour market. On behalf of many thousands of people, I put it to him, with all the urgency that I can muster, that 1199 what he sees as flexibility of the labour market is seen by many thousands of people as casualisation of the labour market.
I know of firms in the midlands that lay off 100 people on one day and the next day offer most of them short-term contracts. I know of a youngster who has worked for the same firm for one and a half years on the basis of 70-odd weekly contracts. Is that the way in which the Secretary of State wants the labour market to develop? That is deeply damaging not only to individuals but to the stability and security of our society.
§ Mr. Hunt
I do not accept any of that. I wanted to give the hon. Member for Kingston upon Hull, East an opportunity to get into the debate, but I will not be able to do that if there are lengthy interventions from hon. Members who get upset if I do not give way.
If the hon. Member for The Wrekin (Mr. Grocott) looks at the labour force survey, he will find that the accusations of substantial increases in temporary and casual work are completely without foundation. The number of permanent jobs is increasing—there are now more than 20 million. The hon. Gentleman does his area a grave injustice by seeking to paint an alternative picture that has no truth and foundation whatever as a general statement of policy.
My right hon. and learned Friend the Chancellor announced several initiatives to improve the operation of the labour market. The new job seeker's allowance, to be introduced in two and a half years' time, will be an important step forward in the help that we provide for unemployed people. The name of the new benefit demonstrates a shift in focus; we are making it clearer than ever before that people will get benefit because they are seeking work, not because they are passively unemployed.
Everyone who is genuinely looking for work will be entitled to the new benefit for as long as he or she needs it. Those who have paid the requisite national insurance contributions will be entitled to a personal allowance for six months, regardless of their income, their partner's income or any savings.
At the heart of the new job seeker's allowance is new clarity about a principle that has underpinned our system of support for job seekers from Beveridge onwards: the principle of mutual responsibility between the state and the unemployed individual.
§ Mr. Hunt
I have given way to the hon. Lady already. Just as the state has a responsibility to support unemployed individuals, individuals have a responsibility to make every effort to find new work.
To make that duty clear from the start, we shall be introducing, with the job seeker's allowance, a job seeker's agreement. Each claimant will have to reach an agreement with his employment service adviser, identifying from the outset the steps that he will be taking to get back to work. He will then have to put that into action.
Last year we introduced job plan workshops. They have already given positive help to more than 112,000 people, with a success rate of more than 90 per cent. Building on that, I am today announcing a new restart course for those who have been out of work for more than two years.
I am also introducing three new pilot schemes in advance of the introduction of the job seeker's allowance. We shall pilot a job finder's grant, paying up to —200 to people who find work after being unemployed for two 1200 years or more, to help with the initial expenses of returning to work. We shall be setting up two further pilots to test new approaches to getting young people back to work as quickly as possible. Those measures will further improve our help to job seekers.
I very much welcome the Chancellor's announcement introducing, from October next year, new disregards for child care costs in working out families' entitlements to family credit, disability working allowance, housing benefit and council tax benefit. That will help 150,000 families, and it will make more explicit the Beveridge principle that the best way off benefits is into work.
That could be worth up to £28 a week in family credit alone, and will provide a powerful incentive for families to move back into work and be better off. It will particularly help those lone parents who want to work but have found that child care costs represent a barrier. That is in addition to the £45 million programme run by the TECs, under my Department, for out of school child care. That programme will create 50,000 new child care places.
The Government attach the highest possible priority to increasing the number of jobs, reducing unemployment and looking after those who most need help. But it is industry and enterprise that create jobs. Everyone of working age should be given every incentive and every opportunity to contribute. Economic growth on its own is not enough.
Much of the industrialised world has discovered the phenomenon of jobless growth, and Europe is particularly afflicted. Between 1979 and 1989—the Organisation for Economic Co-operation and Development economic cycle—the United States economy grew by 32 per cent. and the number of jobs grew by 18 per cent. In the same period, the economy in Europe grew by 24 per cent. but generated only 4 per cent. more jobs. As a result, unemployment in Europe has now reached 19 million, and it continues to rise. In general, it is where labour markets are most flexible that jobs are created. The United Kingdom has the most deregulated labour market in Europe and we have more of our people in jobs than any other major country in Europe.
When my right hon. Friend the Prime Minister went to Maastricht, he was presented with a social protocol that would have given European trade unions a direct role in legislating and opened the door to a whole raft of expensive burdens on business. That would be bad for Britain and bad for Europe, so my right hon. Friend had the courage to refuse to sign up to it.
Last month, the leader of the Labour party—I am pleased to see him here—was presented with a proposal for a statutory 35-hour week in the United Kingdom. That would cost our industries £20,000 million a year and prevent 14 million of our citizens from working hours that they want to work. That would be a very bad thing indeed. The right hon. and learned Member for Monklands, East (Mr. Smith) has said so himself.
I have to apologise to the socialists because I have done them an injustice, for there is an opt-out at the end of their manifesto. It is for a country whose Conservative leadership fought long and hard to be excluded from the most intrusive European legislation. The socialists recognise that, and an opt-out was agreed. Lucky old Denmark.
The Labour party did not fight for an opt-out. Its leader just signed up, on the basis of sign first, ask questions later. Having signed up in Brussels, the Labour leader now claims to have experienced a mystical conversion on his 1201 aeroplane home. The hon. Member for Kingston upon Hull, East now says that there is a difference between the words "must" and "could". I agree that there is. I have the official document, distributed at the press conference at which the hon. Gentleman was present, and the word "must" is there. His leader signed up for "must" and not for "could". That is the difference.
The hon. Member for Kingston upon Hull, East has now given me a version that substitutes "could" for "must". Could he not go a step further? Could he not substitute "ought not to" for "must"? Perhaps it would be easier to say "must not". The charter which I have here, which is the unexpurgated version, states clearly:These measures must include a substantial cut in working time, to ensure a better division of the available work.
I know that Labour Members pretend that the document does not exist, but it does. Let me quote Glyn Ford, Member of the European Parliament, who has said that the Members of the European Parliament are going to campaign in favour of a 35-hour week across the EC. So, Labour still clings to the discredited social protocol.
Our partners, right across Europe, are abandoning that protocol and everything for which it stands. Increasingly, they recognise that there is a connection between job creation and deregulation and they are coming to see the social protocol as an expensive luxury. As Britain leads Europe out of recession, the argument is moving our way. Flexible labour markets and high standards of education and training are widely acknowledged as the twin routes to success. Modern apprenticeships, the new schemes for small firms and the job seeker's allowance are all part of an on-going revolution that will continue to release the enterprise of our people and create jobs for them. I commend the Budget, which is a Budget for jobs, to the House.
§ Mr. William Cash (Stafford)
On a point of order, Madam Deputy Speaker. In an otherwise superb speech, my right hon. Friend the Secretary of State for Employment used, as have other Ministers, the expression "European Union" in rather an extravagant and broad manner. This afternoon, in response to a parliamentary question that I tabled a couple of days ago, the Secretary of State for Foreign and Commonwealth Affairs made an authoritative statement on the Government's policy in respect of the use of the expressions "European Union" and "European Community". He said:Government policy is to use the term 'European Community' when describing matters specific to that pillar and to use the term 'European Union' when referring to all three pillars collectively or to matters specific to the two inter-governmental pillars outside the Community.
Would you be good enough, Madam Deputy Speaker, to take account of that when the expression "European Union" is used in the rather loose manner employed by the BBC and the Financial Times and now by some Ministers?
Madam Deputy Speaker
The hon. Member has made his point, but it is not a point of order for the Chair. Mercifully, the Chair is not responsible for the accuracy or otherwise of what hon. Members say.
§ Mr. John Prescott (Kingston upon Hull, East)
The Secretary of State has been kind enough to say that he might have to leave before the end of the debate because his wife is going into hospital for an operation. I am sure that the House will join me in offering best wishes to his wife, and to him. I shall fully understand if he has to leave the debate. I hope that he will understand that I shall be harsh in my criticism of his Department. The debate is a bit of a surprise, because I thought that it would come on Monday. Things have changed rapidly.
I am delighted to see the Chancellor here with us as we debate the Budget. I recall that we both took part in a debate in 1987, when he was Paymaster General, in which he defended the so-called Budget for jobs. Unemployment has increased by about 1 million since then, although he told us that that Budget would be successful. He told us that there would be more firms, but there are 100,000 fewer than there were then. He told us that there would be an explosion in training, but there are 100,000 fewer places. Those were the predictions that he made as Paymaster General.
The right hon. and learned Gentleman was right about one thing. He said that there would be considerable growth in the economy. There was indeed a massive growth in the economy, with an increase of more than 1 million jobs, showing that if the Government feel that it is a priority they can create many jobs. The trouble was that it was one of those dashes for jobs—the booms and busts—so much associated with Tory Governments. Then the brake was put on—not on the expenses or wages of Members of Parliament, but on the unemployed. After that boom came the general election, and then 1 million people were thrown back on the dole. This Budget is designed to do something similar. Rather than dealing with the problems of today, it is designed to deal with any problems that might arise before the 1996 elections. However, I shall address myself to the problems of today.
The Budget is not a Budget for jobs. On his own admission, the Secretary of State expects it to create more unemployment. It is not a Budget for industrial investment. That will not be enhanced by the policies. It is not a Budget for ordinary people. It is a Budget for the City. If there is any doubt about that, I will quote a paper not known as a Labour paper—the Evening Standard. On Tuesday, I picked up the "West End Final", which said, "£15 billion share boost". That was while the Chancellor was speaking. Within half an hour of his sitting down, another "West End Final" was rushed out, which said, "£18 billion share boost". I picked up the Evening Standard again today and it said:Nearly £25 billion has been added to the value of the shares since Chancellor Kenneth Clarke's Budget on Tuesday".That is what the Budget is about—welcoming the City back to the casino economy. Nothing has changed in our economy, but all those people dealing in stocks and shares have decided that they can make a killing out of what the Chancellor has done. It is all about a City judgment.
I noticed that during his speech the Chancellor had a smile playing on his lips when he said that he was prepared to exempt wine for Christmas. When the people in the City are drinking their champagne and toasting the Chancellor, I hope that they will bear in mind the price of what they have done to the country.
§ The Chancellor of the Exchequer (Mr. Kenneth Clarke)
Will the hon. Gentleman at least acknowledge that the reason why shares were boosted so rapidly is that the people responsible for investing the pension funds of many working people were encouraged to invest that money in British industry? They thought that the outlook for British industry was improved by my Budget measures.
The hon. Gentleman is at least trying to adopt some sort of attitude towards the economy, which is more than the shadow Chancellor was able to do, but he is revealing a neanderthal approach to a free market economy.
§ Mr. Prescott
That is the second time I have been called neanderthal; it must be a strategy of the Tory party. First it was the Prime Minister, and now the Chancellor is saying "Get Prescott, the neanderthal man". The right hon. and learned Gentleman should address the arguments.
As to pension funds, the same headlines could be seen in newspapers in 1987 and the same people were encouraged to buy shares. The pension funds did not invest in manufacturing, but in property and assets other than manufacturing. That is what caused the problems in our industry.
I have heard many promises from many Chancellors and Secretaries of State for Employment about growth being around the corner, but I have yet to see it materialise. We will wait to see what this Budget produces. There is no doubt that it will have considerable consequences for many areas of our community.
The Budget does nothing for the workers, for the homeless or for the helpless. When the people in the City raise their glasses, I hope that they will bear in mind that what the Chancellor has done for their advantage will be at the expense of many people who can ill afford it.
Conservative Back Benchers who were cheering the Chancellor on Tuesday will perhaps pause to think when they are walking through that passageway that we all walk through and see that person wrapped up in blankets. The warmth that he got this morning was from a copy of the Evening Standard that he had stretched across him. The Budget offered him no possibilty of a job or an increase in the housing programme so that he might have a home. I hope that Conservative Members are a little ashamed when they walk past that person in the morning. I feel ashamed, but at least I shall be voting against the Budget. I hope that there are some decent Conservative Members who will rebel against the nature of the Budget and its unfair way of dealing with our people.
§ Mr. Jacques Arnold (Gravesham)
If the hon. Gentleman thinks that the Budget is so inappropriate and awful, why is it that last year the Labour party produced a document entitled, "Labour's Budget Statement 1992-93" but this year it has not got one? Are they frightened of producing one or are they just plain incompetent?
§ Mr. Prescott
It may shock the hon. Member for Gravesham (Mr. Arnold), but we are the Opposition: our job is to address what the Chancellor has done in the Budget and to be critical of it or to praise it. For example, we think that the increase in child care benefit is an improvement and will be welcomed by all in the House. We have to address the essential thrust of the Budget.
§ Mr. Bernard Jenkin (Colchester, North)
Are we finally to hear, for the first time in the debate, what Labour party policy is—to produce a Budget that takes no heed of 1204 City opinion? Does the hon. Gentleman recall what happened in the 1970s, when we used to have Budgets which did not take heed of City opinion and we ended up with the International Monetary Fund coming in to rescue the nation's finances?
§ Mr. Prescott
The hon. Member for Colchester, North (Mr. Jenkin) should have a chat with his father and discuss how his father's party handled the economy during his time. He would be reminded of the collapse that followed the boom of 1987. That was a mistake which did a lot of damage. It reduced skills, levels of employment and investment.
We now have a new Chancellor, and this is the Budget that he has produced to address our current problems. In the Budget he has started to target a lot of people who should not be so targeted. It always used to be the Church and the trade unions that were targeted. Towards the end of his speech, the Secretary of State said that the good old trade unions were being attacked again and that the Government would not be entering into consultations with them, whereas a few minutes earlier he had said that Bill Jordan would be walking in through the front door to discuss the apprenticeship situation with him. Will the Secretary of State be discussing that kind of problem as an act of charity, but not as a right? Everyone should have a right to make a contribution to discussing problems of this type.
I welcome the "back to basics" proposal for an increase in apprenticeships. The Government have seen a bit of sense and gone back to apprenticeships, which are badly needed. Even with the current small amount of growth in the economy, there is a shortage of skilled people. We shall not get an increase in jobs from the growth in the economy because of the lack of proper skills. That situation was caused by the bad decisions made by the Government 10 years ago.
The Government are targeting not collective bodies such as the churches and trade unions, but individuals such as the disabled, the sick and the unemployed. They have decided that people who are unemployed—and many have been unemployed for a long time—will have to prove that they are job seekers. I do not know what 2 million people will have to prove. It was always a requirement that a person had to be available for work in order to get benefit. If the Department had any doubt about a claim, it had all sorts of fraud squads to investigate it.
I wonder what the new procedure will be. Do the Government want these 2 million people to get an employer to sign to say that they had visited the company looking for work? I can imagine the personnel department of some small company having hundreds of thousands of people queuing up and saying, "To get my benefit I have to get a chit from you showing that I have been seeking a job."
It is all very well for Conservative Members to screw up their faces, but presumably some form of proof will have to be provided. Will what the counter clerk thinks about an applicant's statement that he has been looking for work be sufficient? If that statement is not accepted, will the Department adopt the procedure for suspending benefit? Benefit used to be suspended for six weeks, but it is now to be for 13 weeks—a doubling of the delay in payment. How will the proof be provided? We have heard the criteria, but what evidence will be expected from a person 1205 who is on the dole? Those are major concerns for the unemployed, and why I say that we are targeting these people unnecessarily.
Mass unemployment, such as we have in this country, is the scourge of all developed economies. Anyone looking at unemployment in western economies will see that throughout the 1950s, 1960s and 1970s it doubled every 10 years. That has happened in every country. We can quibble about whether our employment is going up or down, but mass unemployment is a substantial problem in the developed western economies. It is also a problem with eastern economies, but I shall refer only to economies similar to our own.
We have to address that particular problem. Our argument is that unemployment has reached and is maintained at far too high a level. Mass unemployment is something that will continue for a very long time, and what the Budget will produce is a low-paid, low-skilled, low-cost and low-value economy. We have no chance of competing against the Pacific rim countries. We must go for a high-wage, high-productivity and high-value production economy.
Everyone agrees that that is what we must aim for, but to achieve it we must invest in education and skills. The Secretary of State has told us that the extra money for the apprenticeships, which we all welcome, will come from another part of his budget—presumably from the budget for training people who will not go into the apprenticeships.
Only a third of our labour force have any qualifications, whereas some two thirds of the German labour force have some form of qualification. We have a long way to go, and the strategy of the Budget to produce more low-paid, part-time, low-skilled jobs is fundamentally wrong.
§ Mr. Clifton-Brown
The hon. Gentleman is strongly criticising my right hon. and learned Friend's Budget for jobs. Perhaps he can explain something to me. France is likely to experience an increase in unemployment of 800,000 this year and Spain has an unemployment rate of 20 per cent. How can the hon. Gentleman think that we are so far out of line with other countries, especially as the hon. Member for Dunfermline, East (Mr. Brown) said the opposite? We have already heard from my right hon. Friend the Secretary of State for Employment that we have more than a million more jobs today than we had in 1979. How can the hon. Gentleman say that we are so far out of line with those other countries?
§ Mr. Prescott
If the hon. Gentleman had been listening instead of talking to his hon. Friends, he would have heard me say at the outset that mass unemployment has plagued all western economies and doubled every 10 years. Unemployment has increased under Labour and Tory Governments alike. My charge is that we have a higher level than is necessary and that things could have been done in the Budget to change that. Any silly fool can look at the figures and say that Spain and other countries are also affected. I conceded that right at the beginning. The hon. Gentleman would be better informed if he listened to what was being said instead of trying to jump in with questions that the Whips have given him to ask me.
The Budget is also designed to justify a wholesale attack on the welfare state. It is all very well the Secretary 1206 of State quoting Beveridge and saying that that is what he wants to achieve. The fact is that at the heart of the Budget is the view that we cannot afford the existing welfare state. The Secretary of State and the Chancellor have admitted that mass unemployment—whether the figure is defined as 2.9 or 2.8 million, we have mass unemployment—will continue at least until 1996-97. I do not think that anyone doubts that mass unemployment will continue throughout the Government's period of office.
Another proposition that we can accept from the economists is that growth will not create enough jobs to compensate for the high unemployment that prevails in developed economies today. It is unlikely that the growth estimated by the Chancellor will materialise—indeed, it is being suggested in some newspapers that the tax revenue of some £30 billion that will come out of the Budget is likely to reduce those limited growth figures. But even supposing that the Chancellor's optimism proves justified and the growth levels to which he has referred are attained, it will not do a great deal to reduce unemployment and will certainly not cure mass unemployment. We are therefore faced with a decision. Are we prepared to fund the welfare state? Are we prepared to fund the unemployed and the disabled?
What has been done to benefits for people with disabilities would certainly appear to be an attack on them. Those same people were driven on to the disability list because in the mid-1980s the Government discovered that they could encourage people off the unemployment register in that way. The Department of Employment's own doctors co-operated in that exercise. As Members of Parliament, we all knew that people could get more money in invalidity benefit. We drove them off the unemployment register and now we are about to drive them back because the Chancellor has discovered that the cost is too high. It is a consideration of the cost and whether such benefits can be afforded. The criteria by which a person is judged to be disabled are to be changed.
We can see the good old hand of the Treasury in all this. The Government did the same in the Chronically Sick and Disabled Persons Act: when they found that more people were entitled to claim, they began to change the criteria and cut the cost. That is what the Budget is all about. We are talking not about meeting people's needs but about meeting the needs of the Treasury. That is at the heart of the Budget.
The Government have decided that they are not prepared to finance a welfare state. Under their present strategy, they cannot achieve growth and they cannot reduce the cost of unemployment, which is about —30 billion, quite apart from the loss of production. That gives rise to a major question, and the Budget sees us at the crossroads. What kind of society is Britain going to have? Is it to be one that balances work and welfare, which was at the heart of Beveridge, or is it to be one that lives with mass unemployment while seeking to eradicate it in the figures, eventually—I gather from rumours that are circulating at the moment—abolishing the Department of Employment on the ground that we will not then need a Minister to come to the House to explain why so many people are unemployed?
§ Mr. David Congdon (Croydon, North-East)
Is the hon. Gentleman saying that there is no case in any situation 1207 for trying to constrain the cost of an ever-growing social security budget? If so, why did the Opposition set up the social justice commission?
§ Mr. Prescott
I am admitting that there is a fundamental question for us all to address. I do not think that there is any doubt that that question will be an issue at the next election. We are preparing ourselves for that argument and will have to present our case. Let us make no mistake about it. I am not arguing that there is no problem to be addressed, especially given that we are faced with mass unemployment. But decisions have been made about whether to give money to those who are well off or fund the welfare state, and the Government have decided to give tax benefits to those who are better off. That is what has created our problems.
The problem that the Chancellor has identified in his Budget is the public sector borrowing requirement. Let us leave aside for a moment the question whether the PSBR is higher than that in other countries and how it is measured. Let us accept, for a moment, the Chancellor's view that the PSBR is far too high—and we could argue about that. The £30 billion cost of unemployment is very high indeed. It would be far better to get people to work rather than leave them to waste away on the dole.
Other factors have contributed to the crisis, too. The problems in our public finances are in part due to the policies that the Government pursued in the 1980s. They wasted £100 billion worth of oil revenue—£10 billion or £15 billion a year. They privatised nationalised industries, stealing the silver to put quick money into the Treasury's coffers while losing the revenue flow from those nationalised industries—about £10 billion a year—[HON. MEMBERS: "No."]—£10 billion since they were privatised, then. As the Chancellor knows, we had both loss-making and profitable industries. But the net revenue was far higher than the tax that the Chancellor is collecting from the privatised industries. The Treasury has lost revenue. The introduction of the poll tax cost another £5 billion. The list goes on and on. The PSBR crisis has been caused not just by unemployment and welfare payments but by the Government's handling of our finances.
The Budget is being used to justify a massive attack on the welfare state in line with the Government's policy in Europe which is that we need to pursue the least cost option. That leads to low skill and to industries that do not have the necessary research and development and investment to produce the kind of wealth to pay for a modern welfare state.
§ Mr. Kenneth Clarke
The hon. Gentleman is arguing that the point of the Budget is to cut back on a welfare state that we will not afford. Will he remind himself of the social security spending figures announced in our spending plans? The hon. Gentleman will see from the Red Book the changes that the Budget represents. In social security, the changes from previous plans are as follows: for 1993-94, £2,300 million extra; 1994, £1,600 million extra; 1995-96, £2,100 million extra. We have accommodated that increase of more than £5 billion by reordering priorities elsewhere.
The hon. Gentleman has fairly praised the introduction of the child allowance and family credit. Whatever else he says, it is absurd to argue that the whole basis of the Budget is that we are not affording a welfare state. We are making 1208 proper provision for a welfare state but it is sensible to stop benefits being paid to those who were never entitled to them to accommodate growth in requirement.
§ Mr. Prescott
Expenditure on the welfare state has increased under all Governments. That is part of the problem. The Secretary of State has identified some growth but there have also been cuts. With ever increasing and mass unemployment, he has to pay more. I should add that, in a low-wage economy, income supplements and so on become available to part-time workers. Is it the Chancellor's view that we can afford the welfare state and the present expenditure pattern?
§ Mr. Clarke
We are demonstrating that we can. But the welfare state has been evolving ever since it was first introduced. It has never been a static social security system. I cannot recall a Government who have made no changes to social security for two or three years at a time. We are introducing new benefits for working mothers and there has been increased take-up of desirable benefits. The hon. Gentleman is standing there resisting attempts to cut fraud and to stop people claiming invalidity benefit when they are not entitled to it. That is an irresponsible approach to the welfare state, and an approach that the Government certainly do not share.
§ Mr. Prescott
It was unfortunate that the Chancellor used the word fraud, and it is fraud in the context in which I use it. The Secretary of State talks about a welfare system based on national insurance principles, and he is going to deny unemployed people the entitlement to 12 months' benefit. That is their right under the national benefits as they are. They make contributions and they are entitled to the benefits. If a private company did something similar, would it not be taken to court?
§ Mr. Clarke
The hon. Gentleman is challenging the part of the job seekers' benefit which states that one is entitled to benefit only if one is available for work. If the hon. Gentleman resists that element of the job seekers' benefit scheme, which is designed to ensure that people do not claim the benefit when they are not seeking work, he is resisting quite legitimate proposals to stop people claiming benefit fraudulently by pretending to look for work.
§ Mr. Prescott
The Chancellor has given a clear indication of how he stands on the matters. In my previous job, I made an allegation about the Chancellor—then the Secretary of State for Transport—when we were in opposition on another case. After what he has done to the railway pensioners with their pension funds, he is undoubtedly now about to raid the pension funds of the Post Office and the coal mines. There is no doubt about that. The right hon. and learned Gentleman told the railway workers that he intended to set them up with a self-funded pension fund which would have no accountability to the Secretary of State. He has since taken money from them, and he is now threatening their assets.
§ Mr. Prescott
The Chancellor may sit there and shake his head, but it is a matter of record. The Government are robbers, and they are involved in an act of fraud. They should make no mistake about it—that fact is known by the electorate. The electors know what the Government are about—it is clearly evident to them. 1209 The Conservative party is no longer credible in relation to a tax hike. It is a party that does not believe in high taxation. The Chancellor gave an interview on a radio programme in which he said, I believe, that it was now necessary to increase taxes. That will be done presumably to provide an opportunity to reduce them again at the time of a general election. That is how the Government play see-saw with the economy at the expense Of the unemployed and the homeless.
One would have thought that the Department of Employment would be concerned about employment, but all that it has done so far is to encourage low pay. The Department and the Chancellor have designed a national insurance scheme which is a pathway to lower pay. There is an incentive now to employers to pay less, because the employer will make smaller national insurance contributions if they pay a worker less. That might be an incentive to try to get people at lower pay. If a mountain is built of people who are working part time, the employer will be encouraged to pay less and less. People will have less money to meet their needs. The justification given for the national insurance contribution scheme is that it will benefit employers—the consequences for employees are considerably different.
We hear a great deal about the deregulation of our economy. I wonder whether the Secretary of State might have told us whether he would guarantee in that deregulation that we will not see a reduction in health and safety regulations. Those regulations are contained in a clause in a provisional Bill to which my hon. Friend the Member for Rother Valley (Mr. Barron) referred. Many people are concerned about this. Will the Secretary of State guarantee that he will not change the essential principle in the Health and Safety at Work Act 1974 which is
designed to maintain or improve the standards of health, safety and welfare established by or under those enactments"?
§ Mr. Prescott
I take that nod from the Secretary of State to mean that he will not change the health and safety legislation which has contributed to the reduction in the number of deaths and accidents in industry.
§ Mr. Hunt
The hon. Gentleman seems to be relying on the Chancellor and me to make his speech for him. I will make it absolutely clear. We have consistently stated that the review of health and safety is to make the system safer and simpler. We have asked the Health and Safety Commission to give us advice on a range of issues, and we now await that advice. I am proud to say that we have one of the finest health and safety records of any country in the world.
§ Mr. Prescott
The Secretary of State must be aware that that is because of the essential principle embodied in the legislation that any changes in safety regulations must be superior to the provisions that they are to replace. It is a simple principle. Do the Government intend to change that in any way? We have seen a Bill which contained that clause. Are they saying now that it will not be done? I should be grateful if the Secretary of State would make such a statement. That is equally as important as the apprenticeships.
§ Mr. Prescott
I take that asurance from the Secretary of State to mean that it will not be changed. I am grateful to him for that assurance. That will be good for our people, and I am delighted about it.
On the business of departmental deregulation and the job seeker proposals, is not the rate of applicants to jobs either 21:1 or 35:1, depending on which area one takes? What is the point of a job seekers' scheme if people have no chance of getting jobs?
That ratio of applicants to jobs works against the 1 million long-term unemployed in particular. What is the position for them? The Secretary of State has acknowledged that special measures are needed for them, but employers will not deal with those measures. How are the long-term unemployed to be dealt with under the schemes? The Department has no sympathy for them. To see the ineffectiveness of the Department, we must look at the way in which it has dealt with education and skill training. That is a most critical area, as the Secretary of State made clear at the beginning of his speech. We welcomed that, and I presume that he did so at the beginning of his speech to catch the evening news, knowing that presumably we would not be able to comment. That is the nature of the organisation of business in the House.
The Secretary of State says that we are to return to basics. I will give him the figures concerning apprenticeships in this country. In 1979, there were 367,000 apprentices. In 1992, there were 240,000 apprentices. That is largely because the Government scrapped the training boards from which many of the skills came, whatever else was said about them. There has been a massive reduction in the numbers.
The Secretary of State has talked of 10,000 to 40,000 apprentices. I could not keep up with the right hon. Gentleman because somehow he shot off to talk about a figure of 150,000. I do not know what period of time he was talking about. I understood that there were to be 10,000 national vocational qualifications, rising to 30,000 or 40,000. Is the figure of 150,000 to be achieved in the next century? [Interruption.]
Madam Deputy Speaker
Order. It does not make for clarity when there are signs, whispers or seated interventions. The House must return to the normal way of conducting business.
§ Mr. Prescott
If the total of apprentices reaches the figure of 150,000 that the Secretary of State wants by the next century, that will be 10 per cent. of the number of trainees in Germany now—an ambitious programme indeed to get Britain going into the next century and to produce the skills which we want for our industry. It is absurd—absolute nonsense.
The figure is so low because the Government do not have the guts to tell industry that it must invest in people and in skills. If it is left to a voluntary system, industry will not do it. All the countries with skill training have a statutory framework and a levy principle. We broke away from that and since then we have seen a collapse in training, even in limited skill abilities which have always been a problem in Britain.
Now the Secretary of State comes along and looks at NVQs and training and enterprise councils and tries to deliver some sort of apprenticeships. I hope that he is 1211 successful, because we desperately need those apprenticeships, but it is not enough: the Government must tell industry that it has to make a proper investment in the training of our people. That might need a compulsory element, but every other country in Europe has such an element.
§ Mr. Prescott
The Secretary shakes his head, but he does not have the problem of not getting a job because he has no skill. That is reality for many of our people. Those are the consequences for our young people who have no jobs or training.
While I was getting ready for the debate, I read some of the promises made by previous Secretaries of State. They told the House what they were going to do to train youngsters aged between 16 and 17, but not one of their promises was ever achieved. All the promises were given with great confidence, but the record of the Department of Employment in producing people with skills is deplorable. That is quite apart from what that has meant for the economy. Industry should be ashamed of what it has done for the training of youngsters in this country. The Government are concerned with creating a low-pay and unskilled sort of economy. That is not the way Britain will go forward.
The Department of Employment talks a lot about the importance of skills, but even in that area it is a complete failure. It has failed to train a labour force, to implement fair employment practices and conditions and to influence a policy of full employment.
I was interested to hear the Secretary of State say that the Department of Employment was at the core of economic policy. I wish that it was, along with the Department of Industry. But I did not think that the Government believed in strategy for industry or for employment. I thought that that was all given to us by the market.
I want to see Departments making a judgment and being actively involved and intervening. That is what happens in many European countries with Governments of the left or right. They need to plan, to intervene, to have objectives, to help industry and to train people. The Government have a role to play in that. But during the 1980s the Government copped out of that. The Department of Employment has been at the heart of doing basically nothing about it. It should be a powerhouse. That is important.
The Department of Employment could have done more to shape economic policy. I am glad that the Secretary of State acknowledged that it should have such a role and that will be a basis for part of our debate. The Treasury, in pursuit of money to reduce subsidies and to deal with the financial crisis that has come about as a result of its economic incompetence, has sought financial solutions which have been to the detriment of our economy.
The deregulation of the bus industry led to the collapse of a manufacturing industry. In order for the Treasury to save £100 million in subsidies, 7,000 buses have gone down the Swanee and a whole manufacturing industry has gone.
I hear that the Government are now talking about the west coast main line. Two years ago I put forward a plan to finance that line with leasing and new forms of private financing. The Government have not yet learnt those methods, despite them being used in Europe. Under such a 1212 system we could combine training, modernising the infrastructure, providing manufacturing jobs and developing our roads.
The Department of Employment should be arguing with the Treasury about how to produce jobs, provide a modern economy and train people, rather than skivvying around to get a few bob more from the Chancellor, complimenting him on that and then discovering that that money has simply come from another part of the Department's budget.
The Chancellor has given the Department of Employment nothing. Its money has been going down and down. If one excludes the unemployment benefits, it has had nothing. It is the handmaiden of the Treasury. It has not been the core of decision making where it should be. If it considered industrial policy, it could have been.
One thing that the Department could have done in the light of the Budget announcement of a cut in MIRAS, which, along with local authority housing cuts, will result in savings of about £1 billion, was to transfer that money to rebuild a housing programme.
Those savings under MIRAS could have been used to provide 100,000 houses and 100,000 jobs. Those figures are available. Instead of the Treasury using that money to pay the City so that it can have its profits, it should have been used to meet the needs of the homeless, to provide jobs and to stimulate the economy.
I intend constantly to return to what I call the jobs audit. We do not necessarily need to spend more money, rather to choose different priorities in order to get people back to work. The Government deliberately do not choose those priorities but rather maintain a high level of unemployment. Does the Secretary of State know what effect the Budget will have on jobs? Did he ask the Chancellor? Did they do a job audit? Did he ask how much unemployment would be created?
§ Mr. Hunt
It is not.
Secondly, this is a Budget for jobs and growth. We will see the results as the months and years unfold. The hon. Gentleman still has not explained why the United Kingdom is the only country with unemployment below the Community average and falling. In every other part of Europe, it is rising.
Madam Deputy Speaker
Order. We cannot have intervention upon intervention, particularly when they are made from a sedentary position.
§ Mr. Prescott
The Secretary of State is right; I did use those words. I was referring to employment services—payment for training, and so on. That correlates with what is happening in the economy, and if that figure is excluded there has been a reduction in his Department's budget. Even if it is included, one could say that there has been a reduction.
But, leaving that aside, the Secretary of State said nothing about the Budget's consequences for jobs. This is 1213 not a Budget for jobs. There are many different computer forecasts to play with. I shall use the one from Warwick. Cuts in housing and in local authority expenditure and the pay freeze for public sector workers mean that more people will be put out of work. That is the reality. There is no doubt about that.
Estimates can be made. They are constantly made. The Department of Social Security estimates the effect of its policies on unemployment. It has been shown that 250,000 public sector jobs and 75,000 manufacturing jobs—325,000—will be lost. To keep those people unemployed will cost £3.5 billion. Why do we not consider that? That is a charge on the public sector borrowing requirement. Why are we not concerned to reduce the borrowing requirement by reducing the number of those whom we pay to keep idle on the dole? Would not that be a better way to use money?
Housing cuts will cost a further £1 billion. There is only house building at the moment, no other construction. If the housing programme is reduced, as the Chancellor described—the Financial Secretary is here, he can confirm that—the inevitable consequence will be fewer people in work. Already, the building industry accounts for 250,000 unemployed people.
The Secretary of State's rhetoric shows that he wants to be at the heart of economic decision making. But one would have thought that a Secretary of State for Employment might have asked the Chancellor in the run-up to the Budget what its effect would be on jobs. He might have done and the Chancellor would have said, "Don't worry, there will be a growth in jobs." To which the Secretary of State would have said, "Thank you very much, Chancellor." Then he would have moved on.
The reality is unemployment. If the Secretary of State is in any doubt, he can ask the Financial Secretary about the consequences to the public sector borrowing requirement of the money that is being settled for the local authorities and the cuts in housing. The subsidies will go directly to the Treasury, not to the housing industry.
In reality, the Government are not interested in unemployment. If the Secretary of State accepts the consequences for jobs that I have just described, he is choosing higher unemployment than is necessary. That is our charge against the Government. They do nothing to provide homes for the homeless, skills for the unskilled, jobs for the workers and help for the helpless.
Our charge is not only that the Government are uncaring; they are incompetent and deliberately maintain high levels of unemployment. That is what this Budget is about and that is why we shall oppose it bitterly during its progress through the House.
§ Mr. David Madel (Bedfordshire, South-West)
In the early part of his speech, the hon. Member for Kingston upon Hull, East (Mr. Prescott) welcomed the new apprenticeship scheme that my right hon. Friend the Secretary of State announced, and I hope that he and the representatives of the Liberal party will join the cross-party discussion and co-operation to get that important scheme off to a good start. We all know the necessity of giving 1214 young people good training, and the atmosphere will be hugely helped if there is seen to be cross-party support on that.
I welcome the Chancellor's firm restatement in his Budget speech of Conservative philosophy—a modern welfare state, a competitive British economy with low inflation, and a country that vigorously pursues policies which remove obstacles to an expansion of world trade.
The unified Budget has made economic policy more coherent to people and it has given us a chance for a much wider debate on the Budget than usual. I for one hope that the unified Budget will stay.
The Chancellor fully delivered his pledge to help all pensioners and the less well-off in the commitments and the figures that he gave with regard to VAT on fuel. I am also glad that he coupled that with a £35 million per year increase in the home energy efficiency scheme.
I previously had a financial interest in the window business. I no longer have such a interest, so I no longer feel inhibited in speaking about it in the House. I therefore looked up the 1990-91 regulations governing the making of a grant under that scheme. Among other things, they refer to a grant being made for draught-proofing and the insulation of any hot water tank or cylinder which is not already insulated.
What is missing from the regulations is the need to replace windows. If windows and external doors were replaced by double-glazed sealed units, fuel bills would drop considerably. We always want to take action to help people to reduce the amount that they spend on fuel. I hope that the regulations will be amended to enable people to obtain a grant to fit new windows and external doors if necessary. Ill-fitting windows and external doors add hugely to people's fuel bills. The regulations should be amended so that people can take advantage of my right hon. and learned Friend's welcome extension of the home energy efficiency scheme.
In his Budget statement, my right hon. and learned Friend said that a good social security system was one under which the better-off and people in work pay to support the poor and the disadvantaged. I support that view. However, there is one area where that aim does not fit, and that is the Child Support Agency. Many fathers on modest incomes are struggling to bring up a second family and simply cannot pay what is now being demanded by the CSA. Those fathers often made maintenance arrangements in a court of law, but the agreed figures have been overturned by the CSA.
§ Mr. Alex Carlile
Does the hon. Gentleman agree that the position is even worse than he has described because, in a matrimonial breakdown, it is now virtually impossible for solicitors to advise either fathers or mothers on any financial settlement, due to the unpredictability of the demands being made by the Child Support Agency?
§ Mr. Madel
I am glad that I gave way to the hon. and learned Gentleman. I am aware that he is a distinguished lawyer. I am sure that Ministers will have heard his point. Indeed, the Government are urgently investigating the matter.
Where there have been sudden changes to various payments, the Government have often introduced transitional relief. Therefore, a good first step might be for some form of transitional relief to be introduced in maintenance payments. That would help those who are 1215 suddenly faced with the CSA overturning court orders. It is a serious problem, and the CSA's behaviour is contrary to my right hon. and learned Friend's philosophy on the welfare state and social security system—the better-off helping the less well-off. "Better-off' simply does not apply in many CSA cases.
My second brief point on social security is that we should never underestimate the damage done by the late Mr. Robert Maxwell to faith and confidence in private and occupational pensions. Maxwell pensioners are by no means out of the wood. A considerable number of them live in my constituency, and it is the deferred pensioners, in particular, who are racked by uncertainty and anxiety.
I am delighted that my right hon. Friend the Secretary of State for Social Security is to introduce changes to the system. We need a battery of new laws to ensure that never again can some Robert Maxwell wreak havoc on those unfortunate enough to work for such a company. It is a thoroughly welcome change in the social security system. In a constituency like mine, with hundreds and hundreds of Maxwell pensioners, it cannot come quickly enough.
My right hon. and learned Friend referred to motor taxation. We cannot say that we have not been warned about future increases in fuel duty, in addition to those announced on Tuesday. It should accelerate research and development into even more fuel efficient engines. That in itself should create new jobs.
However, I ask my right hon. and learned Friend to keep two points in mind. The first is the future of the vehicle excise duty—the tax disc. There is a case for freezing that cost. My right hon. and learned Friend has frozen mortgage interest relief at £30,000, but there is also a case for freezing the tax disc, especially in view of the plans to increase fuel duty.
Secondly, we should not forget that world oil prices are now at a very low level. If they suddenly shot up again because of tremendous instability in the middle east, I hope that my right hon. and learned Friend would reconsider his projected increases in fuel duty. Rocketing oil prices, plus his proposals, would place the car industry in considerable difficulty, and put a considerable burden on motorists and other consumers.
The other interesting point mentioned by my right hon. and learned Friend in relation to the car industry and the roads programme was that, when the technology is ready, motorway electronic charging will be introduced. That, too, should result in new jobs as the new technology is developed. I am delighted that the Government have opted for pay-as-you-drive rather than a flat rate charge. We believe in a shift of taxation from income to spending, and that charge is a form of spending.
However, if electronic charging is introduced for certain stretches of motorway, some traffic will be diverted to A roads that simply will not be able to cope with such an enormous increase in traffic. That applies in particular to my constituency. The thought of traffic pouring off the M1 on to the overloaded A5 through Dunstable is too horrible to contemplate. Therefore, when the technology is introduced, it must take account of the fact that certain stretches of motorway must be free of electronic charging, because the A road system would not be able to take the sudden increase in traffic.
I want to say a few words about education. I welcome the Government's success in having already reached the target of one in three of our young people going to university. I doubly welcome the confirmation in the 1216 Budget that university tuition will remain free. That is as good an investment in people as could possibly be imagined.
My right hon. and learned Friend referred to students' living costs, and said that the mixture of grant and loan would continue, with a movement away from grant and towards loan. I do not quarrel with that. Indeed, the Select Committee on Education and Science, on which I served, advocated that in the early 1980s. I hope that people will not forget the existence of the access hardship fund for students in difficulty. It is a scheme that the Government should certainly retain.
I am sure that there was a surge of relief in higher education and throughout the whole education system when it was confirmed that VAT would not be applied to books. Now that we have escaped that, we should refocus attention on the net book agreement. I understand that it is being considered by the Office of Fair Trading. I am sure that I speak for many hon. Members in saying that the price of books in this country is rather high compared with, for example, America. The net book agreement is not in the public interest. Books are an important part of student life, and prices could be reduced.
My right hon. Friend the Secretary of State for Employment mentioned the new apprenticeship scheme, which I welcomed in an intervention in his speech. is extremely good news that, when young people have that qualification, it will be the vocational equivalent of an A-level. I support the principle of high-quality, work-based training. However, I reiterate my concern: once an agreement has been signed between trainee and employer, were the company to go bust or get into severe financial difficulties, there must be a system to enable the young person to resume his work-based training elsewhere. That will require a great deal of employer co-operation.
The truck manufacturing industry in Dunstable collapsed last year—imagine the damage that that has done. Industries do go bust, so if we are to increase the number of apprenticeships, there must be a safety net so that, should the worst happen, the apprentice can resume work with another employer without delay.
My right hon. and learned Friend the Chancellor mentioned many times the need to get unemployment down. Two things are most desperately needed to achieve that. The first is a deal on GATT, and certainly before 15 December. Every post-war surge in prosperity has followed a reduction in restrictions on world trade.
Secondly, we must make the EC single market work properly and fairly. It is of the utmost importance to this country that our EC partners come out of recession quickly, because we are so desperately dependent on them for our exports. It is of the utmost importance that they, like ourselves, pursue policies that lower the costs of providing employment and thereby create more jobs.
§ Ms Eagle
Does the hon. Gentleman agree with the Budget's basic assumption that even the modest rates of growth that it predicts will be sustainable? As the hon. Gentleman pointed out, that will depend on the European Community emerging from its current deep recession, because it is one of our main export markets.
§ Mr. Madel
It is terribly important that the Community emerges from recession. I believe that the hon. Lady's constituency is near Ellesmere Port, where Astras are 1217 manufactured. The Cavalier is manufactured in Luton, and both plants desperately need increased opportunities to sell to the Community.
The conditions for industry expansion are extremely favourable. Paragraph 3.12 of the Red Book refers to oil prices, and assumes an average price of$17 a barrel during the forecast period. Paragraph 3.19 states:Low commodity prices and spare capacity in G7 countries should continue to exert downward pressure on inflation.We have as good an opportunity for economic expansion now as since the end of the Korean war, after which there was a downward movement in world commodity prices.
We see the strains that high unemployment imposes on our EC partners, and must constantly look for new ways to boost manufacturing and business. I welcome the new venture capital trusts on which my hon. Friend the Financial Secretary will soon publish details and invite comments. It too will be a real job creator.
My right hon. and learned Friend stressed that his is a long-term Budget to secure a much better economic future. He rightly promised no overnight miracles. We on this side of the House must remember Rab Butler's philosophy about the patience of politics. My party must show great patience and support for the Government in the next few years as we move into faster economic expansion, low unemployment and, above all, lower inflation.
§ Dr. Jeremy Bray (Motherwell, South)
The Chancellor's skill in designing his Budget was well demonstrated by the hon. Member for Bedfordshire, South-West (Mr. Madel), who is a man of broad sympathies and of views that I find more acceptable than those of some Conservative Members. I hope that that remark will not do the hon. Gentleman too much damage in his constituency.
The hon. Gentleman's ability to commend the broad sweep of the Budget, which adds hugely to taxation and makes such heavy cuts in expenditure, and to find details that he can also commend—and which we on this side of the House support, such as plans for road building and the introduction of road pricing—nicely characterises the Budget's shape as a political instrument.
As to the Budget's likely impact on the economy and its broad strategy, I will concentrate on what must be done now and in the future, and not parcel out credit and blame for past events and for the deplorable state of the economy today—with its huge imbalances of public borrowing, balance of payments and, worst of all, appalling unemployment.
First, I want to give the Chancellor more credit than he probably deserves. He is right to seek to reduce the public sector borrowing requirement by one means or another, not at once but over a period of five years. He is right to announce in advance changes in taxation and in planned expenditure levels that will make clear that balance for which he is arguing—realistically, as he sees it. However, I do not agree with the particular levels of taxation and expenditure that he chose.
Then there are matters on which I will reserve judgment. The Chancellor did not clearly explain his strategy for the balance of payments, the exchange rate and monetary policy. I do not suggest that he has no strategy or that his strategy is necessarily wrong—simply that he has 1218 not explained what it is. The markets, to operate confidently, must have a clear indication of the Government's monetary strategy.
Finally, the Chancellor is plainly wrong to cling to deregulation and benign neglect of industry as the panaceas that will restore the competitiveness and capacity of manufacturing and make possible the reduction in unemployment that we all seek. However, overall, and given the political constraints within which the Chancellor is working, the right hon. and learned Gentleman did what I would expect a competent Tory Chancellor to do.
The competence was to a degree thrust upon him, perhaps without the right hon. and learned Gentleman entirely appreciating it, by the discipline of having to launch a unified Budget. That made him examine economic issues as a whole. I gave a push in that direction with my amendment to the Industry Act 1975 requiring the Treasury to publish economic forecasts.
From internal evidence and the Budget, I suspect that the Treasury, in its advice to the Chancellor, may have gone further with the optimisation of policy, which was also covered by my original amendment to the 1975 Bill, which the House approved. If the Treasury has not done that further work—there are many ways in which it can be done—it should have done so. I believe that the Economic Secretary knows what I am talking about.
Since before the 1987 stock exchange crash, I have been publishing the results of policy optimisation on the Treasury model, using the Treasury's own computer programmes. It is a simple concept. Having identified priorities on inflation, unemployment, taxation, public spending, public borrowing, the balance of payments and so on, a model embodying the available evidence on how the economy works will show the policy changes that should be made now and those that ought to be made in future.
Each year, I have undertaken post mortems on those exercises, which have shown that, if Chancellors had followed advice available within the Treasury at the time, they would have avoided the main mistakes made since 1987—most notably, the excessive reflation of 1987 and 1988.
Models and forecasts are certainly imperfect. That is as true of the Treasury model as of any other. This year, with the help of three good research assistants, I undertook that policy optimisation exercise on not only the Treasury but on the London Business School, National Institute of Economic and Social Research and Oxford Economic Forecasting models. I gave the results at a seminar at Warwick university in July. Alan Budd, chief economic adviser to the Treasury—who in the early 1980s was an adviser to the Treasury Select Committee when I was a member of it—commented extensively on that paper at the seminar.
The results of that comparative study of policy design and optimisation were published in the "Oxford Review of Economic Policy", a copy of which is in the Library.
A fortnight before the Budget, a new version of the Treasury model was produced, revised in respects that I and others showed had been wrong. I have not had time to study the policy recommendations to which that new version leads, but with the revisions to the model to which the Treasury has drawn attention, I expect it to indicate the sort of Budget and forecast that the Chancellor produced.
For that reason, I do not question the likelihood that the figures produced by the Chancellor are based on the best 1219 advice that he has received within the Department. I may be naive in that, but I am prepared to believe the attempt at objectivity in those forecasts.
That optimisation exercise, which has been or could easily be done in the Treasury, will show a consistent exchange rate and monetary policy strategy which the Chancellor did not announce in the Budget. As I have said, there is no monetary or exchange rate policy in the Budget.
All that does not mean that the results presented in the Budget could not have been achieved by other arguments or on the back of an envelope. The Treasury model is not a black box. The way it works is consistent with the economic common-sense terms in which the conclusions would, I am sure, have been presented to the Chancellor. A test of good methodology is that, after the event, everybody claims to have known the answer.
On the evidence that is published in the "Financial Statement and Budget Report", the exchange rate is vulnerable to the intractable deficit in the balance of payments. To have run a balance of payments deficit in the depths of a recession and not to offer any recovery to zero, even after the depreciation that we have had, and to stop short of the publication of the forward look into future years is at least to fail to produce the evidence that a monetary and exchange rate policy is sustainable and consistent with the fiscal balance.
To put the balance of payments right, supply side measures are needed which are not treated in the Treasury model. It does not treat the further deregulation and benign neglect of industry which has been pursued by the Government and which is recommended for future years, nor the effects of similar policies which will now be incorporated in the model and which have been shown to be insufficient in the past.
Also, it does not treat the positive supply side measures of the Labour party on investment, training and research, to which my hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott) referred, which Conservative Members are bored with us constantly reiterating, but which are important.
Why has not the Chancellor set out an exchange rate and monetary policy strategy if his advisers probably have a good one under the table? First, he or his advisers may feel that they want to see more of how the strategy performs. That is wise in the light of the nostrums that we have had in the past and the experience of past monetary and exchange rate strategies. Evidence from all sources must be examined, and this is no exception.
Also, nobody but the Treasury and the Federal Reserve Board in Washington is equipped to do the sort of policy optimisation work on the Treasury model that I believe the Treasury has been doing. Academic modellers, the Bank of England, City economists and even journalists could do it, but they are not doing so. The technical details are fiddly, but the methods are well within the competence of intelligent graduate students, who can learn them in three months, though not at any British university.
In monetary and exchange rate policy, we are dealing with influencing people's expectations. It is no use the Treasury using an argument if its listeners are not equipped to follow that argument and react to it. The game does not work if one is seeking to influence people's expectations and they are not doing the sums necessary to work out how to form their expectations. They have to learn to play the game. If that game does not work for the Government, how 1220 much less will it work for the Opposition, given the barrage of misrepresentation to which the statements of Opposition Front-Bench spokesmen are subjected?
We are now past the stage where politicians and their advisers cannot understand the arguments that are needed on monetary and exchange rate policy. It is the public and the pundits who need to catch up. No Chancellor has adequately acknowledged the sheer technical competence and integrity of Treasury modellers and forecasters—a competence and integrity so inadequately portrayed in the anodyne caricature of analysis which successive Chancellors serve up in the "Financial Statement and Budget Report". Of course, forecasts are not accurate., so let the forecasters explain why, and what the implications of that inevitable uncertainty are for policy-making, as I have tried to do.
The body in this country that looks at the development of models and forecasting is the macro-economic modelling consortium on which the three bodies represented are the Economic and Social Research Council, the Treasury and the Bank of England. The consortium has proposed that modellers—those whom it supports, such as the London Business School, the national institute and so on—should participate in the sort of exercise that my research assistants and I carried out this summer. That recommendation has come from the panel on which the Economic and Social Research Council, economists, Treasury representatives and the Bank of England are all involved.
The Treasury and Civil Service Committee—I do not see a member in the Chamber, but I am sure that it will take the point—could play a useful role in commissioning the exercise in future years, thus getting people in Parliament, the City and the media used to the idea of how expectations could be formed more rationally.
The Treasury's panel of independent forecasters—I welcome its operation, and it is doing a useful job—is in a more difficult position than the Select Committee. Even by asking the panel to do the exercise, the Treasury and its Ministers would appear to be endorsing the results that would emerge before anyone knew what they looked like. There is a limit to how far the Chancellor and the Treasury can try to lead public and technical opinion.
There is a further difficulty that the Treasury would face in spelling out monetary and exchange rate policy, which is consistent with the fiscal stance that the Budget adopts. An exchange rate policy that would work could require major improvements in supply side performance in manufacturing, for which the Chancellor and Opposition Members hope but for which there is not yet any solid evidence.
The country needs the stark realisation of the necessity of securing that supply side performance improvement. The objective may be achieved by people in industry responding more effectively to the Government's conception of supply side incentives, or it may need Labour's much more active policies on investment, training and research. What I suspect will prove to be the case is that it will need both.
Either way, the Treasury has the clearest evidence, and it should be spelled out. The longer the picture is obscured, the greater will be the delay in addressing the greatest economic challenge we face, which is to restore the competitiveness and capacity of manufacturing, the more difficult will be the task and the greater will be the challenge from overseas. No monetary or exchange rate 1221 policy is likely to ease the fiscal stance: only effective supply-side policies will do that—and then only in the longer term.
Let us consider what the political effect is likely to be of the balance that the Chancellor has chosen in the Budget between the tax increases and expenditure cuts that he has had to make. The Government will certainly face grave problems on the issue of public sector pay and in maintaining an adequate standard of public services in the next three years—that is putting it mildly.
Economic models take a neutral stance in the balance between raising taxes and cutting expenditure and they do not measure the quality of services. As Members of Parliament, however, we are acutely conscious of the importance of those services and of the vital question of their quality.
Ministers evidently believe that the Opposition are stuck with having to choose between losing the election by increasing taxes or by incompetence in the conduct of economic policy. The Government believe that elections are lost by increasing taxes or demonstrating incompetence; that, they believe, is the problem facing the Opposition.
Despite my best efforts to defend the Chancellor's competence today, when the country judges the issues of raising tax or competence in the running of economic policy, it will condemn the Conservative party. That will not change before the next election. I have tried this afternoon to raise the competence stakes. The Chancellor of the Exchequer and the Treasury could do much more.
§ 7.2 pm
§ Mr. David Evennett (Erith and Crayford)
I am delighted to be able to participate in the Budget debate. I congratulate my right hon. and learned Friend the Chancellor of the Exchequer on his excellent Budget speech and on presenting a package of measures that will not only find favour across and in all sections of the country but deal with the economic and financial needs of our nation. In addition, the Budget projects us forward out of recession and back into growth and prosperity. It is at the same time an innovative and practical Budget and it should inspire considerable confidence in financiers, industrialists and the man or woman in the street. [Interruption.] I am sorry that the hon. Member for Kingston upon Hull, East (Mr. Prescott) will not even listen to my speech. I listened quietly to his speech and I now want to develop my ideas. I shall come to his speech later.
For my constituents, the most important economic factors are low inflation, economic growth and jobs. The Budget will pass the test on all three fronts. My constituents, of course, also want the Government to reduce their budget deficit and they accept that tax increases and reduced public expenditure are necessary to ensure a sound economy.
The whole community in my constituency, whether they work on the factory floor, in a shop or in an office, share the common aims of increased prosperity, better value for taxpayers' money and stable prices. People on fixed incomes, particularly those on pensions, are extremely keen that there is low inflation and that stable prices are maintained. Those with families are concerned 1222 about their jobs and job prospects. Those in work obviously want a secure future. All sections of the community, therefore, were looking forward to my right hon. and learned Friend's Budget with hope and expectation—hope that it would set the country on the right path for future growth and expectation that it would be fair. They looked also to my right hon. Friend the Chief Secretary to rein in and curtail public expenditure. They have not been disappointed on either front.
I encountered much praise for the Budget and for my right hon. and learned Friend the Chancellor in my constituency yesterday. Considerable praise was expressed for his Budget speech on television because it was in simple language that the general public could understand. That was widely welcomed. His Budget was understood by more people because it was in simple language.
I do not wish to spend too much time on the Opposition because they appear to be quite bankrupt of new ideas about how to deal with our economic problems, but we all know that they would spend more and more money on just about everything. What they never say, of course, is how that would be paid and how the ordinary taxpayer would suffer accordingly.
We know that the Labour party is a party of high taxation. We heard that this afternoon from the hon. Member for Kingston upon Hull, East—have more taxes and use taxation for redistribution. That is what Labour Members are always after.
§ Mr. Evennett
They admit it, and that is why they lose elections.
The Opposition have no time for the wealth creators, the job creators or the entrepreneurs in our society. There is no chance of the Opposition supporting them. They offer no initiatives, no support and no commitment to those who make the real wealth.
Labour is afraid of business—it always has been and business will never trust it. We know that Labour believes in more expenditure, more borrowing and more taxation. We have heard this afternoon about the social chapter, the minimum wage and new union rights. We have heard it all before, but we heard it again today. That is one reason why Labour Members will stay on the Opposition Benches and we will stay on the Government Benches.
In Erith and Crayford, people looked for action in four key areas, to which I shall confine my remarks: first, local businesses; secondly, reform of benefits, particularly the disability living allowance; thirdly, help for pensioners to meet the imposition of VAT on fuel and power; and, fourthly, tax increases that were perceived as fair.
§ Ms Eagle
I am grateful to the hon. Gentleman for giving way on the point of fair tax increases. Does he agree that under the Conservative Government one third of the huge tax giveaways of the 1980s went to the top 1 per cent. and that the current tax increases are hitting the lower-paid and those who are least able to afford them? Is that his definition of fair?
§ Mr. Evennett
That is not only not fair but not true. I shall develop my argument on fairness subsequently. In the past 14 years, prosperity across all sections of society has increased. That has been very important.
§ Mr. Evennett
May I carry on a little? When I reach the part of my speech on fairness, I will give way to the hon. Lady.
In Erith and Crayford, there is a large number of small firms and businesses. In the past few years, they have suffered a two-pronged attack—an increase in bureaucracy and red tape and the worldwide economic recession. They have urged my right hon. and hon. Friends at the Treasury to understand their problems and plight and to take action.
Firms on my industrial estates of Thamesmead, Belvedere, Erith and Crayford, who employ many thousands of my constituents, wanted the Budget to deal with their real needs and issues. I know from conversations that I had yesterday with representatives of some of those firms that they are delighted with the outcome of the Budget. In particular, they welcomed the help for small businesses, with the raising of the VAT threshold, the abolition of compulsory audits for firms with a turnover of less than £90,000 and tax measures directed to help small businesses to get started and raise the necessary capital. Those are good news stories for businesses and small firms in Erith and Crayford.
Together with those measures, the deregulation legislation proposed in the Queen's Speech and the Chancellor's determination to tackle the problems of late payment of bills will go down well with my business men.
Cash flow is vital to smaller firms. Irrespective of how good a product is, if a firm does not get paid promptly on delivery, it can run into serious or perhaps terminal trouble through no fault of its own. Smaller firms therefore welcome my right hon. and learned Friend's comment in his Budget that he would reconsider this issue and try to deal with it for them. This year's Budget has been a Budget for business, a Budget for jobs and a Budget for training.
I welcome the speech that was made by my right hon. Friend the Secretary of State for Employment this afternoon and applaud his new apprenticeship scheme for young people, which is innovative and will be good for young people. I also warmly support his three new initiatives for small firms to encourage training in the engine room of our economy, which is the small business.
The second subject which I wish to mention is the determination of my right hon. Friend the Secretary of State for Social Secuirty to reform the social security system and the urgent need to reform the disability allowance. I know from my constituency casework that the number of people who draw that benefit has increased dramatically in my area. I also know that by no stretch of the imagination are all those claimants severely disabled.
All Conservative Members believe in helping people who are in genuine need. We believe that there should be a benefit to look after those people who are genuinely disabled to ensure that they are supported. However, quite a number of constituents have complained, at my surgery at Erith town hall on a Friday evening, that the present system is unfair and that disability allowance is given to too many people. We all know stories of people who can claim disability allowance who are not genuinely disabled. That was not what was intended when the benefit was introduced.
The new incapacity benefit which will take effect in April 1995—with a new objective medical test, which I believe has been long overdue—will allow the benefit to reach the people who are in genuine need. People who are genuinely disabled will not have a problem because we shall ensure that they obtain the benefit. It is those people 1224 who do not deserve or need it who need to be worried. The new benefit will remove arbitrariness and will be seen to be fair.
The hon. Member for Hampstead and Highgate (Ms Jackson) asked about fairness. Many people in my constituency believe that the disability allowance is unfair.
§ Ms Glenda Jackson
I am the hon. Member for Hampstead and Highgate; my hon. Friend the Member for Wallasey (Ms Eagle) asked questions regarding fairness. The question that I wished to ask the hon. Gentleman was, if the past 14 years have been so fair, why do a quarter of the poorest people in the European Community live in these islands?
§ Mr. Evennett
The hon. Lady wanted to intervene on the fairness issue and I said that I would allow her to intervene on the fairness issue later, so she is not correct even about that. I was referring to her, not to the hon. Member for Wallasey (Ms Eagle). It is important that measures are perceived as fair by the majority of people. During the past 14 years, there has been an increase in affluence in all sections of the community.
The third subject which I wish to mention is VAT. In spite of all the pundits, especially those on the Opposition Benches, there was no extension to the VAT fold in the Budget. We all welcome that. Opposition Members have not even been able to acknowledge it.
Pensioners and people in low-income groups were genuinely worried about what would happen when VAT was applied to fuel and power. In early October, I went to the local meeting of the British Pensioners and Trade Unions Action Association. Apart from the usual party political nonsense that one hears at some of those meetings, many people expressed genuine worry about how they would be able to afford the increased fuel bill. I received many letters and had many telephone calls and meetings with other individual pensioners about the problem that they perceived that they would have. Many of those people who had small private pensions did not want to find that they would be excluded from help that would obviously go to those on benefit or very low incomes. They wanted the tax situation to be perceived as fair to them, too.
The fact that my right hon. and learned Friend the Chancellor of the Exchequer has given an across-the-board benefit to all pensioners should reassure individual pensioners and pensioners' organisations that the Government have been fair to all pensioners in the Budget.
Many pensioners in my constituency have told me that, although they welcome the reductions in interest rates for people who have mortgages and for all people who are borrowing money, they have noticed that their own private investment incomes have been reduced accordingly and they have been concerned. They might have another 10 or 20 years to live off their capital and they are concerned about the diminishing return for them. I am sure that they will be delighted with the new pensioners' guaranteed income bond, which they will greet with considerable enthusiasm.
I believe that the extension of the home energy efficiency scheme, which was mentioned in the Budget, and the extension of eligibility to all pensioners and disabled people, will also be welcomed by pensioners' groups.
§ Mr. Evennett
I think that all the measures will be expensive, but they will be perceived as fair to all pensioners, not just those on very low incomes. A large number of pensioners work for many years to enter retirement with a small occupational pension or savings. The pensioners to whom I spoke were naturally concerned about the future. The Budget has helped them and will continue to do so.
I shall now discuss general perceptions of fairness. Whether the Budget is greeted favourably or unfavourably in our area depends on whether people perceive it to be fair to all sections of society and fair in dealing with everyone. I believe that the tax increases that my right hon. and learned Friend the Chancellor has proposed are fair—there is to be no increase in income tax, a limited increase in excise duty on drink, but more substantial increases in the price of tobacco and petrol. Those are welcome measures. I passionately believe in increasing the price of tobacco. I should have liked my right hon. and learned Friend to put more tax on tobacco, because smoking is a health risk. I welcome, however, the tax increase that has taken place this year.
I believe that the benefit reforms will be regarded as fair by the vast majority of people in the country. Business people think that it is a fair Budget and will have great support.
This year's Budget has been a no-nonsense Budget from a no-nonsense Chancellor of the Exchequer. It has been crafted and constructed to deal with the problems that confront the country and to help those in real need. Obviously, tax increases are never popular, but I believe that the vast majority of people will recognise that they are essential at this time and that cuts in public expenditure are also important.
However, the fact that my right hon. and learned Friend the Chancellor has managed to continue to increase expenditure in the vital sectors of health, education and law and order highlights the Government's priorities. Yes, we have to curtail expenditure in certain sectors, but we believe passionately in developing policies in other sectors and we are prepared to spend extra money in those sectors.
I believe that, in time, this year's Budget will be regarded as a great Budget from a great Chancellor of the Exchequer. I also feel that people appreciate his common-sense approach and plain speaking. This year, the people understand what he has to say and they like it.
§ Mr. Alex Carlile (Montgomery)
We have heard some interesting arguments during the debate and before I discuss broader issues I shall mention two. During the course of his contribution, with some of which I agreed, the hon. Member for Bedfordshire, South-West (Mr. Madel) referred to the venture capital trust and, I think, the enterprise investment scheme. Any scheme that encourages investment in industry, especially manufacturing and productive industry, is to be welcomed. I have read the detail, such as it is, that has been supplied so far about those schemes. I would urge on the Treasury the view that any such scheme is unlikely to succeed if it does not include front-loading of tax relief.
The business expansion scheme has been much condemned because of the way in which it was used to attract money into property-related investment. Some of that investment must have been beneficial for the building 1226 industry, which desperately needs help, and I make the specific point that the scheme attracted investment because those who invested could obtain tax relief as they put their money in. I urge the Government not to abandon that principle and to confirm that front-loaded tax relief will remain available, especially in the venture capital trusts, which should give a boost to the rather ailing venture capital industry in this country.
My second specific point is about something that the hon. Member for Erith and Crayford (Mr. Evennett) said concerning pensioners and their savings. He gave a broad welcome to the pensioners guaranteed income bond. I have read the press release describing what detail there is about the bond so far, which was issued by National Savings as the Chancellor sat down having delivered his Budget speech. I hope that the Government can avoid the accusation that seems justifiable thus far—that the bond is something of a confidence trick by the Chancellor.
We have been told that the bond will be introduced after the new year and, according to National Savings, its interest rates will reflect the market at the time of its introduction. We know that the Chancellor is likely to reduce interest rates between now and the new year, so it looks as if the bond will be introduced at an historically low interest rate. The Economic Secretary to the Treasury should tell us when he replies to the debate whether the bond will be linked in some way so that its interest rate rises if and when general interest rates rise. He shakes his head. That will be a great disappointment to pensioners all over the country, many of whom have small savings—£10,000 or £20,000, perhaps—which make a considerable difference to their standard of living. They have seen the return on their investments drop dramatically, and they too suspect, as we all do, that interest rates will rise.
Unless something is done to secure pensioners against losing because of future increases in interest rates, the bonds will prove unattractive, and financial advisers will rightly urge caution before investments are made in them. I ask the Economic Secretary to reflect on the effect of introducing the bond at an historically low interest rate.
The Chancellor delivered the Budget with his usual—and, to many hon. Members, enviable—self-confidence, but as a piece of economic thinking it was breathtaking, not so much because of what it told us but because of what it did not tell us. Like many right hon. and hon. Members, I have been examining the Red Book to see where the money will come from to fill the gap of £3 billion to £4 billion that was unexplained in the Budget speech. That is easily discovered on page 117 of the Red Book: it comes from the contingency reserves. The table on that page shows that the reserves are to contribute £3.5 billion in 1994-95, £7 billion in 1995-96 and £10.5 billion in 1996-97. The Chancellor did not tell us in his speech the effect that using the contingency reserves to that breathtaking extent will have on the economy and its future growth. It is about time that we were given an explanation, and I hope that we shall hear it later.
I shall now deal with employment policy, and unemployed people's view of the Budget. Five groups of people will have listened to the Chancellor's speech with bated breath. The first group is the young people who hope to be employed in future, and the second is people who are already on the employment market but who are unemployed. Then there are those who have worked but are now long-term unemployed, and those who have worked and want to work again but who are sick and 1227 therefore unemployed. The fifth group consists of those who are in work but who, because their jobs are so badly paid, are very poor and need help: they are entitled to help from the Government because they are doing exactly what the Government urge, and are working even though their wages are very low.
All those groups will have looked for the prescription that the Government gave them in the Budget to deal with the ills that they experience. But some found the milk of human kindness prescribed only in the special form dispensed by the Secretary of State for Social Security. He is the dalek of the unemployed, uttering the word, "exterminate"—meaning, exterminate people from the statistics. One of the results of the Budget will be that for about the 29th time since 1979—I may be one out; it may be only the 28th time—the Government will be able to massage the unemployment statistics because of changes in policy. In the months to come we can expect a possible reduction of 200,000 in the official number of people unemployed, but that will not be a genuine reduction. I shall return later to the Secretary of State for Social Security and his plan for the sick and unemployed.
The first category of people whom I mentioned—young people who hope to be employed—cannot have greeted the Budget with anything other than the deepest gloom and depression. All over the country we have a vast stock of brilliant and able young people who can learn skills, technology and knowledge, who have the capacity to soak up the skills needed to enable the economy to grow—many Members of Parliament can no longer do that, because we have passed that absorbent age for learning.
Yet what prospect do those young people face? Those who come from affluent homes will be all right, because their mums and dads will see them through university, will give them the money to live on and will probably encourage them to take out student loans because they represent a cheap form of credit, but will pay off the loans on their children's behalf. Those young people will come out at the end of their higher education with a reasonable prospect of employment, because they will not be worried, at least at the beginning of their graduate life, about taking jobs with relatively low pay, if the prospects are good.
Then there are the others—those who come from poorer homes whose parents will not be able to help them out, except at the cost of extreme sacrifice in some cases. If they go to university, they will be saddled with loans that now represent about one third of the cost of being at university. When they come out, they will face what is effectively a form of substantial additional taxation—the repayment of the loan.
Let me give an example. The Government seem to think that £14,000 a year is a sufficient salary from which to start paying back the loan. I hope that many young people who come out of university will feel that school teaching is an attractive profession. In the early years of teaching they may earn little more than £14,000 a year. Are they really to be regarded as sufficiently affluent to start paying the price of their loans immediately at the beginning of their working lives?
Salaries of people starting work in another category, in manufacturing industry, do not on the whole compare with the salaries paid by firms in the City. Are able young people to be driven out of manufacturing industry because they feel that they will be able to repay their student loan more successfully if they work for a firm of accountants or become lawyers? That does not seem to be a way to 1228 potentiate young people and to enable the country's economy to grow. It is a depressing picture that will drive many even into the choice of not going to university.
There is also the question whether people can get jobs when they graduate. I know of many examples of young graduates who have no chance of jobs related to the skills that they have acquired. I was told by a constituent a few weeks ago of his son and daughter-in-law. The son is a brilliant first class honours graduate in a scientific subject and the daughter-in-law is a brilliant first class honours in history. Both had been promised research funding, which was removed before they could begin research; so they set about looking for work and obtained jobs selling hamburgers in the constituency of the hon. Member for City of Chester (Mr. Brandreth), who is in his place. There is nothing wrong with selling hamburgers; it is an honourable occupation. Regrettably, there are rather more hamburger outlets in Chester than there used to be when I lived there as a young man and the fine, old shops were in greater abundance. People should not have to sell hamburgers if they have been trained in biotechnology or in microcomputer electronics or other subjects that are needed to enable the country to develop and grow.
The Secretary of State for Social Security has produced a test for those who are sick and unemployed that is more like a parlour game than a medical test. The consultation paper that was produced yesterday on the medical assessment for incapacity benefit contains items such as the following—a severity score of 17 points for those who cannot carry out simple mental arithmetic—that means that there will have to be a reshuffle in the Treasury. There will be 23.5 severity points awarded to those who are frequently muddled or confused—that will virtually wipe out the Government. There will be 4.5 severity points for those who cannot lift and push an unladen wheelbarrow—one of the tests that will be used to contradict the opinions of doctors as to whether people are able to work. Will doctors be expected to have an unladen wheelbarrow in their consulting rooms? With respect to those who sit in your Chair, Mr. Deputy Speaker, one test that may be especially apposite is the 11 severity points for regularly losing track of conversations.
That is the regime that the Government are seeking to impose to decide whether people are fit for work. Until now, doctors—perhaps some do need to be more careful, for there is always room to remind the professions to apply high standards—have been respected for being able to decide whether people are fit for work. By those absurd tests, the Secretary of State for Social Security is to introduce a standard whereby civil servants rather than doctors will decide whether people are fit for work. Yet again the Government are set on conflict with the medical profession.
What about the poor and employed? The wages councils have been abolished. The Government have pulled from under the poor and employed those very structures that at least fought for them, and on a statutory basis, to ensure that there was some kind of fairness even in poorly paid employment. There is nothing in the Budget that encourages people to take the jobs that the noble Lady Thatcher used to urge upon them; and that the present Secretary of State for Social Security, and others who have been given illegitimate titles at various times by the Prime Minister, encourage them to take to justify the feeling that they are doing something worthwhile in obtaining poorly paid employment. Why should people work as packers, 1229 assemblers or even hill farmers, who are no longer able to earn a decent income, if the Government cannot provide a minimum level of support to ensure a decent standard of living?
Even housing has been attacked in the Budget. In Wales, where there is a desperate shortage of housing to rent in rural areas, Tai Cymru—Housing for Wales—is being given less money to build. What on earth can be the justification for that?
In the Budget, we wanted to hear a strategy, not for the Conservative party or to call off the wreckers on the Tory Back Benches, but for the country for the years to come. If we had seen a real strategy for employment, our happiness would have been far greater than our regret at a Government success which might have deprived us of the opportunity of further by-election and election successes. The Liberal Democrats thought that the Government might have learned the lessons of their by-election defeats and the marvellous victories of my hon. Friends the Members for Newbury (Mr. Rendel) and for Christchurch (Mrs. Maddock). We would have willingly said to the Government "Well done" if they had produced a strategy that would have enabled unemployed and poor people to look to the future with greater confidence. Regrettably, they did not do so. In due course, the Chancellor will be judged on results and not on rhetoric.
§ Mr. Roy Thomason (Bromsgrove)
I join others on the Conservative Benches in congratulating the Chancellor on his excellent Budget. I shall not repeat the words of praise that have emanated from others, but entirely support them.
The Chancellor was seeking to achieve twin targets of low inflation and growth. I listened with interest to the comments of the hon. Member for Kingston upon Hull, East (Mr. Prescott). As I understand his argument, he wanted to reduce unemployment but did not take too kindly to growth, and he did not accept that the Budget would lead to growth. I do not understand how he expects unemployment to be reduced other than by virtue of growth in the economy.
I listened to the hon. Gentleman attack the rising share prices in the City. He seemed to think that the confidence of City investors in Britain and from abroad showed that there was something wrong with the economy, instead of being, as it is, a declaration of support.
I also listened to the hon. and learned Member for Montgomery (Mr. Carlile) who followed the traditional course of Liberal Democrat spokesmen by being a manic depressive. That party gets incredibly excited for short periods, then goes into a deep decline. Today was a time of such decline. We heard doom and gloom, we were told that interest rates would rise substantially thus depriving people of the advantage of the new investments that they could make.
We were also told that the Government should not eat into contingency reserves. The whole point of having contingency reserves is to have money available to support public services at a time of high inflation, when it is necessary for Government to divert resources because of emergencies. When we have stability in the economy, there is no need for such high reserves.
1230 If the hon. and learned Member for Montgomery had thought about the targets of the Budget and about the success on which it was building, he would have appreciated that my right hon. and learned Friend the Chancellor was correct to reduce the contingency reserve. But doom and gloom will not allow that.
The hon. and learned Member complained about reductions in house building. He should have told the House that the Government have pledged that the Housing Corporation will build 20,000 more houses than planned. As a result of lower prices, we are creating more house building; that is what he should have told us. But that is not good enough for hon. Members on the doom and gloom Benches.
I congratulate my right hon. Friend the Secretary of State for the Environment on his allocation of local government funds today, pursuant to the announcement in the Budget. He has said that there is to be more money available for local government. Although, clearly, there will be some pressure on general levels of council tax, my right hon. Friend has acknowledged in the distribution of grant the needs of particular areas, especially those with growth problems and on the urban fringes, of which my own authority is one.
I am delighted that Bromsgrove will be allowed to spend about £1 million more than it did last year, and that it will receive that same amount in extra grant, so that the council tax in my constituency can remain broadly the same, if the local authority chooses to spend at its new increased standard spending assessment level. That is welcome, and it is an acknowledgment of the needs of individuals and areas which is typical of this Government.
There have been complaints from local government that the level of increase is inadequate. Those who criticise fail to appreciate that 70 per cent. of local government expenditure is based on wages and salaries. It is for local government, as it has done on occasions in the past, to ensure that it gets maximum value for money and that it limits pay rises to a level which can be afforded by the nation as a whole. I see no reason why local government should not contain its wage expenses.
I pay tribute to the work of much of local government in delivering value for money; that drive must continue. We must look for extensions in competitive tendering and for more productivity in local government. Today's Audit Commission report points to fraud running at £25 million a year in local government. That is clearly one area in which action must be taken, and I hope that local government will note the Audit Commission's comments in seeking to deal with the problem.
I now turn to business investment. I welcome the help that my right hon. and learned Friend the Chancellor has given industry by creating a low-tax economy and by giving assistance to the self-employed in VAT limits——
§ Mr. Thomason
That comment comes ill from an hon. Member in a party that has consistently committed itself to increasing the level of taxation for business and for individuals.
§ Ms Eagle
Will the hon. Gentleman admit that his Government's Budget figures demonstrate that taxation collected this year, as a proportion of gross domestic product, is 34.5 per cent., and that it will go up by 1998, on the Government's own figures, to 38.5 per cent.? When 1231 the Labour Government left office, the figure was 34.25 per cent. The Tory Government are a Government of high taxation, and their claims of low taxation have been exposed for the scam they are.
§ Mr. Thomason
I take note of the fact that, under the terms announced by my right hon. and learned Friend, the proportion of public expenditure will be reduced from 45 per cent. to 41.5 per cent. We shall have less government and not more government. The Labour party consistently argues for more and more and more public expenditure, and for more taxation.
There is a need to increase productivity, and much has been achieved to date by British industry. Management has been transformed in the past 14 years; much was done in the Thatcher years. We now have industry that is competitive. We have a work force who identify with the objectives of the employer in ensuring common success, not just for the shareholder and the manager, but for the whole work force. That transformation has been achieved on the back of a series of legislative proposals, and will be continued in the spirit of the Budget.
We also see delivered in the Budget an opportunity to improve the skills of the work force. There is new training for apprenticeships, and there is education investment. Better standards will be attained so that the new generation will be fit for the workplace. However, in the international league, Britain's productivity levels still lag behind those of some countries.
We need high growth and high investment. The two go together, which the hon. Member for Kingston upon Hull, East has difficulty in understanding. He complained about being likened to prehistoric animals. When I heard some of his comments, I understood the relevance of that criticism. High growth and high investment, running together. lead to improvements in productivity. We need to ensure that there are adequate margins to allow for investment. The call I hear again and again from British industry is that it wants to invest more so that it can then achieve a level of productivity second to none.
We have a problem with short-termism, as even Opposition Members may agree. I hope that future Chancellors will have the opportunity to address that problem as the economy moves forward. We need to ensure that pension funds do not look just for immediate, short-term gains. We want the banks to be more flexible. We want less constraint on venture funds. Against that, we need to ensure that London maintains its position as a leading international financial centre, and we should not do anything that interferes overtly with that.
Short-termism leads to the search for a quick return rather than to long-term planning, and there is not sufficient incentive for plant investment. We sometimes invest in the wrong sort of business asset—in land rather than in plant. A pressure that is especially important for smaller businesses is the need for high capital repayment on loans which can hinder their cash flow.
I welcome the steps that the Chancellor has taken to deal with some of those problems, but I hope that he will go further in the years ahead. I hope that he will look critically at opportunities, when he can afford them, for capital allowances to be given. I hope that he will consider whether it would be appropriate for United Kingdom pension funds to bear tax on short-term gains. I wonder 1232 whether he will consider the liquidity requirements of banks, which might encourage them to look at equity investments and longer-term loans.
Above all, what is needed for a long-term investment strategy for British industry is stability. The Budget is an important step in producing that stability that industry requires. Entrepreneurs need encouragement. Family businesses want equity partners. Business starters require long-term help and industry must have new plant to boost productivity. We are on the road to economic success, and we need to ensure that we achieve it through long-term investment.
§ Ms Angela Eagle (Wallasey)
I listened carefully to the speech of the hon. Member for Bromsgrove (Mr. Thomason). He must be one of the few people to have visited Eurodisney, as he seems to have spent all his life in fantasyland. I do not recognise the society that he described.
I noted the lack of response on the prickly issue of tax rises when I questioned him on the overall tax burden. It is an untypical occasion in that it is our first ever unified Budget. Unfortunately, it is leading to a depressingly familiar mixture of wrongheaded ideological economic bigotry from the Government, and cynicism that is so glaring that only the British Conservative party seems to be capable of it.
The Budget is also revealing because Budgets are a time for choice. They reveal the Conservative philosophy behind what they do, their views on society, for which we shall soon call them to account in the run-up to the next election. The Budget is cynical because of the utter betrayal of all the Conservative party's election promises, none more so than on taxes. That is what this Budget represents.
We must go back to the Budget before the last general election in 1992 and see how the Conservative party then presented the economic state of the nation. First, there was a tax-cutting Budget. When we look at the Red Book from that time, we find that the deplorable state of the economy was either conveniently not noticed or wilfully covered up. I shall leave it to individuals to decide who caused the mistakes.
The £50 billion deficit on the PSBR, with which we are so concerned at this time, was absent from the figures and was much lower than those in the Red Book at that time. It was only after the general election that the small and conveniently underestimated deficit on the PSBR suddenly ballooned to £50 billion and became the centrepiece of the strategy for the two subsequent Budgets that we have had this year in the aftermath of the general election. We have a Chancellor who boasts about cutting the PSBR figure placed before the electorate in the Red Book by no less than £8 billion. That is £8 billion fewer for public services, schools, hospitals, investment in our crumbling infrastructure, welfare protection, transport, and so on. In the Budget, 3 per cent. of GDP was taken out of the economy. By any stretch of the imagination, that is a massively deflationary package.
The Howe Budget in 1981, which caused such a catastrophic depression, was openly described as a deflationary Budget for taking a mere £1.8 billion of expenditure out of the economy. Taken with its 1233 predecessor in March, there is no description for the Budget other than massively deflationary, and we must be worried about that.
The two Budgets must be taken together. Only then can one see the colossal switch in Government expenditure and values facing us now. It is a huge pincer movement. There has been a £23 billion overall increase in taxation. Who would have believed that from looking at the Conservative party election manifesto?
As I tried to explain to the hon. Member for Bromsgrove, the GDP share taken in taxes, based on the Government's figures, is forecast to go up from its present 34.25 per cent. to 38.5 per cent. by 1998. I must point out once more for the record that, in 1979, when the last Labour Government left office, the share of GDP taken in taxes—the overall tax level in the economy—was 34.75 per cent.
Income taxes are to be raised, albeit surreptitiously, by £5.2 billion, through the freezing of allowances, changes to the married couple's allowance and changes in national insurance contributions, all of which are the opposite of the pledges that were given during 1992 and will add the equivalent of 3p to basic income tax rates.
The Conservative Government do not raise income tax rates directly—they do not have the guts or the courage to do that. They raise them surreptitiously and try to claim that tax rises are not going on. But the facts are there. When people look at the deductions from their pay packets from next April, and as the tax increases begin to bite in the following years, they will understand, more than the Government believe, precisely what is involved in the Budget package.
It has been estimated that we have also taken back with the massive rises in taxes almost all the tax giveaways that were such a feature of Conservative Governments in the 1980s. But they have not been taken back from the people who received them in the first place. As I pointed out, almost a third of the money given away in tax increases in the 1980s—some £9 billion—went to the top 1 per cent., while only £4.5 billion went to the bottom 50 per cent.
That is why in the past 14 years of Conservative government there has been a reversal in income distribution, so that the difference between rich and poor, and the number of people who are now poor, is back to the level it was when General Booth first invented policy statistics and began to measure them in 1886. That is a deplorable record of which the Government should be ashamed.
As well as massive tax rises, we are seeing swingeing cuts in the welfare state. That is another way in which the Chancellor is trying to balance the books, which are so unbalanced by the Government's economic mismanagement. We have heard much in the debate about changes in the benefit system and the way that it will affect some of the worst-off people. That very much reflects the values of the Conservative Government: do not take back the massive tax giveaways that were given to those who are already rich, but instead tax those on invalidity benefit, and introduce VAT on fuel so that some of the poorest people in society can be taxed to pay for the economic mismanagement; but whatever one does, do not tax those who can afford to pay it.
1234 We have heard announced in the Budget a vicious three-year squeeze on the public sector, which involves public sector pay and provision. I seriously doubt whether those spending targets can be kept. If they are kept, as a result of decisions taken in the Budget we shall have a public sector that is increasingly dilapidated and unable to replace essential goods, services and infrastructures.
We must also remember that the public sector has been grossly neglected over the past 14 years. It is already in a weakened state. The fairness of introducing a public sector pay freeze and expecting it to last for three years, on top of the annual freeze on the 1.5 per cent. increase for those who work in the public sector, beggars belief. It will be extremely difficult for the Government to make their pay policy stick.
§ Mr. Clifton-Brown
The hon. Lady argues that the Budget is deflationary. Therefore, I can only assume that she wishes to increase public expenditure. If that is the case, which of the many taxes aired by the Labour party would she increase?
§ Ms Eagle
I shall come to the deficit shortly and explain what I believe should be the principles for dealing with it. I hope that the hon. Gentleman will wait until I get to that part of my speech.
None of the massive increases in taxes and vicious cuts in public spending was mentioned in the Conservative party manifesto. The manifesto claimed that the Conservative party was the party of low taxation; a claim that has been exposed for the cynical farce that it is. The Conservative party boasted about increasing public expenditure, yet as soon as the Conservatives have their greedy hands on the reins of power, they do the opposite.
The Prime Minister's promises—they have been much quoted in the House, so I will not repeat them—have been exposed for the cynical sham that they are. Soothing pre-election noises about the welfare state have been replaced with fundamentalist new brutalism, which was rampant at the Tory party conference. It is fairly clear from looking at the position of the Conservative party at the moment that the right of the party is on the rampage, and it is led by those in the Cabinet whom the Prime Minister one accused of being of doubtful parentage. They are beginning to get their way. The lunatics have taken over the asylum and they are in the driving seat. The Prime Minister is either with them and agrees with them, or he is too weak to stop them. In the next few months, we shall be able to judge which of those conjectures is true.
There is nothing new about the Conservatives' ability to play fast and loose with their election pledges. At the last general election, there was a famous and effective Conservative party smear about Labour's so-called tax plans. Hon. Members will remember all those posters saying things like "Labour's tax bombshell" on all those free poster sites given by the tobacco advertisers so that the Tories could put their propaganda around the country. The Conservatives claimed that, under Labour, a car worker earning £12,000 a year would be £359 a year worse off and an electrician earning £30,500 would be £563 worse off. As a result of the Budget, by 1996, a car worker will be £520 worse off and an electrician £570 worse off. I hope that the electorate will bear those illustrative figures in mind when they next consider which way to vote at a general election. The electorate will never trust the Conservative party again. 1235 The willingness to deceive the electorate is nothing new for the Tories. The Prime Minister and his Cabinet colleagues are just following a discredited tradition that has existed for a long time in the Tory party. Recently, I was shuffling through a book shop when I came across a book entitled "My Style of Government: The Thatcher Years" by Nicholas Ridley. It was the late Lord Ridley's memoirs, which I got for £2.99 off a discount rack, presumably because the market was working. I want to quote a couple of his pearls of wisdom. First, writing about the run-up to the 1979 election, he said:They"—the British electorate—were not invited to switch to a Government with clearly spelt out superior alternative policies. Margaret Thatcher was careful not to articulate them too clearly in public for two very good reasons. First, she was not at all assured of her colleagues' support for what she wanted to do. Second, it is never wise for an opposition leader to expose his or her detailed policies to the possibility of ruthless dismemberment by the Government.Later, he said:Thus, the full nature of Thatcherism was not known to the electorate in 1979. Nor was it fully understood within the Parliamentary Party.
The Prime Minister has carried on that tradition and taken it further. Rather than hiding what he aims to do, he has said that he will do the opposite. That is progress in the Conservative party.
There is general agreement that the £50 billion deficit in the PSBR must be tackled, but there is no Government analysis of where the deficit came from. It is almost as if it just descended from above and landed on the Government and they now have to think of a way to deal with it. In reality, it is here because of the failure of their farcically named economic miracle. It is descended directly from the failures of their 14 years in power.
There is also £100 billion worth of North sea oil revenue to be taken into consideration. They have given it away in tax cuts for their rich friends, leaving British industry unmodernised and in a weakened state. The OECD recently said that two thirds of the public sector borrowing requirement is cyclical—it is unemployment related. The figures show that £27 billion of the deficit goes on paying to keep people on the unemployment registers, where they are unproductive.
Typically for the Conservative Government, they have decided that if close to half their deficit is a result of unemployment, they should cut benefits. They attack the victims and the symptoms but never the causes. Given the structure of the deficit, a job strategy should have been at the heart of the Budget. Noticeably absent from this Budget, as it was from the March Budget, is any such strategy. Most of us would welcome the sprinkling of supply-side policies, but they are irrelevant given the size of the problem.
We have to cut the £27 billion cost of keeping people on the dole, not by cutting unemployment benefits but by creating jobs and getting people back to work. The fatal flaw in the job seeker's allowance—it is a revealing name for the benefit, which causes cynical, hollow laughs among unemployed people—is that it blames the victims of unemployment for their situation. It does nothing about demand in the economy and it almost blames people for being on the dole.
On average, 22 people chase every vacancy. When the Secretary of State for Employment went into the job market after leaving university, there was a job for every person looking for one. The situation has since deteriorated 1236 markedly. Nobody would disagree with supply-side measures that make it easier for people to look for jobs, but behind the unwritten strategy is the assumption that jobs are there for them to take. Twenty-two people chasing every vacancy shows that the jobs are not there. Therefore, we must do something to stimulate demand.
The Budget is predicated on several dubious assumptions. The first is that the rather modest growth rates that the Budget predicts will be unaffected by its deflationary aspects. After the Howe Budget, which was less deflationary than this, growth plummeted. This time, there is no credit boom to fuel economic recovery, as there is a mountain of debt caused by the deregulation of the financial institutions that the Government introduced in the early 1980s.
Secondly, the Budget assumes that world trade will recover rapidly and grow, and possibly also that there will be a deal on the general agreement on tariffs and trade. Both those assumptions are dubious and not a predictable enough basis for an entire Budget strategy.
Thirdly, the Budget assumes that the public sector squeeze will stick, but there will be real troubles with that, and rightly so.
The Budget punishes victims and makes the wrong choices. It has the wrong economic and political philosophies behind it. We shall condemn it and vote against it for those reasons.
§ 8.7 pm
§ Mr. David Lidington (Aylesbury)
I listened with care to the hon. Member for Wallasey (Ms Eagle). She thought that the public sector deficit was far too high, but she did not want to put up taxes or cut public expenditure. She glided gently over public borrowing. Whatever his critics would say about the late Lord Ridley, they would never accuse him of intellectual incoherence, and the hon. Lady and her hon. Friends might do well to learn the lesson of intellectual coherence from the life and politics of Lord Ridley, rather than taking up one or two of his tactical hints, which they seem to have done successfully over the past few weeks.
I wanted to begin my speech on a non-partisan note. One of the fruitful disciplines of having a unified Budget is that it provides an institutional discipline for Whitehall Departments to think carefully about priorities within the context of the Government's overall programme and to consider how the policies of each Department relate one to another. The example that I had in mind was transport.
I was pleased that at the margins of the announcements of my right hon. and learned Friend the Chancellor was the decision to ring-fence money so that the crossrail project could proceed on its next stage. As my right hon. Friends know, I hope that that means that the Government are backing the project whole-heartedly and I look forward to the next stage and its eventual completion.
My right hon. and learned Friend the Chancellor announced measures that will affect transport policy. I welcome the decision to make it easier for the private sector to become involved in the planning and financing of infrastructure projects. That may have the beneficial side effect of making it more transparent to judge the cost and benefit of road schemes compared with rail schemes, which traditionally have been calculated using different analyses. 1237 I also welcome my right hon. and learned Friend's decisions on petrol duty and an experimental road-pricing scheme. Those decisions raise difficult questions. My hon. Friend the Member for Bedfordshire, South-West (Mr. Madel) said that A roads or minor local roads might be swamped with traffic if a motorway toll charge were so high as to force traffic off that motorway. The road-pricing and petrol duty measures will reduce congestion and pollution, but they would have the inevitable effect of biting hardest on poorer drivers, the ones most likely to be forced off the road.
The Budget provides us with a very welcome opportunity to develop a transport policy that is in line with the Government's environmental objectives. I was glad that my right hon. and learned Friend, in announcing his measures for the financing of transport and taxes on transport, referred to the United Kingdom's international obligations to reduce emissions. I hope that the debate that has been initiated by the Budget statement will be fruitfully taken further, both in the House and in the country at large.
I am aware from the controversy over the proposed A418 in my constituency of the difficulty that policy makers inevitably face in reconciling the competing demands of economic growth, the need for good communications, including good road communications, and the need to maintain a civilised environment in towns and cities and in the countryside, the beauties of which people can continue to enjoy.
§ Mr. Peter Ainsworth (Surrey, East)
Given that we accept a degree of hypothecation in the road tolling proposals, does my hon. Friend agree that it would be helpful if the money raised by road tolls was not ploughed straight back into the motorway system but applied to transport infrastructure projects generally—with, of course, the assistance of the private sector?
§ Mr. Lidington
My hon. Friend has made a characteristically constructive proposal which I hope our right hon. Friends will take seriously.
I was interested in the fact that my hon. Friend the Member for Surrey, East (Mr. Ainsworth) raised the question of hypothecation, because my right hon. and learned Friend the Chancellor also referred to it in his announcement. Another unintended consequence of a unified Budget, from the Treasury's point of view, is that Ministers collectively will be bound in future to consider the Government's priorities, not only on spending but on what is the best means of raising the revenue with which to finance those expenditure priorities. I know that to speak in such a way is to challenge one of the most hallowed doctrines of Treasury theology, but I confess to being a fully paid-up member of the heretics and blasphemers tendency when it comes to that belief. I have already referred to the tension that inevitably exists between the priority to be given to economic growth and environmental needs.
Hon. Members have rightly spoken about the problem of unemployment. I welcome the Chancellor's Budget and agree with the plaudits given to my right hon. and learned Friend by Conservative Members by the business community and by observers in the media. When people look back on the Budget of autumn 1993, they will judge 1238 its effectiveness in terms of how far it was seen to promote the chances of more British men and women moving into productive employment in the medium term.
In my constituency, unemployment is still way below the national average—for which my constituents and I are grateful—but it is still high by Aylesbury's historic experience. Although I welcome the fact that unemployment has fallen in recent months, it is still too high and needs to be further reduced.
I welcome the initiatives in the Budget to foster and develop businesses, particularly small businesses. If every small family business could be enabled to take on one additional employee, that would make an enormous dent in the national unemployment level. My right hon. and learned Friend's announcement about late payments and statutory audit requirements will be warmly greeted by business men and women in my constituency.
The tax changes to encourage investment and reinvestment in family enterprises are also welcome, particularly the tax concessions for investment in the proposed business link schemes announced by my right hon. Friend the President of the Board of Trade.
One lesson which we have learnt as a country during the past few years is that it is all well and good to encourage businesses to start up—it is healthy that we should do so—but a number of people go into business without equipping and training themselves for the difficulties and challenges that that will bring. The business link scheme promoted by the Department of Trade and Industry is an important way in which the Government will be able to focus support and advice on small businesses during the crucial early years and months of their development.
I hope that the Department of Trade and Industry will soon give approval to Thames Valley Enterprise's bid to set up business link offices in Aylesbury and in two other towns in the Thames Valley area.
I welcome the measures that have been announced to improve the quality of the British work force and the priority to be given in the Government's public spending plans to education and training and to the apprenticeship scheme announced by my right hon. Friend the Secretary of State for Employment. As that scheme develops, he will be able to draw on the good practices of the many Government, voluntary and business initiatives up and down the country, including the scheme run by the Aylesbury industrial training group, which is an active client of Thames Valley Enterprise.
Despite the predictable criticism from the Opposition, there is everything to applaud about the principle of the job seeker's agreement. It is surely common sense that when an unemployed person presents himself or herself at a jobcentre, he or she should not only sign on and obtain a list of potential job vacancies or employers to approach but discuss a plan, tailored to individual experience and expectations, which he or she will be able to follow in his or her search for work.
There are measures that can be taken to improve the effectiveness of the job seeker's agreement and to ensure that, when it is introduced, it will be positively welcomed by unemployed people. It is important to ensure that Employment Service staff are adequately trained in developing such agreements with their clients. I know that my right hon. Friend the Secretary of State, like every other Minister, has a finite kitty from which to draw, but I urge 1239 him to look again at the time that we allow to elapse before such measures as job clubs are available to those who are unemployed.
Constituents of mine who have been unemployed for a long period tell me that they were at their most enthusiastic, determined and creative about finding new work in the weeks and months immediately after they were made redundant. By the time unemployed people qualify for extra help of the kind that we have understandably targeted on the long-term unemployed, much of that initial drive, commitment and self-confidence has dissipated. I hope that my right hon. Friend the Minister will consider whether there are ways of giving people some of that assistance at an earlier stage in their unemployment.
Finally, I want to refer to the international scene. Despite what Opposition Members have said, the fact that the United Kingdom expects 2 per cent. growth at a time when our main continental markets are stuck deep in recession is something of which the Government and, more particularly, British industry, should be very proud. We should be looking not merely for a cyclical upturn in our main European markets but to long-term competitiveness in British industry and in industry throughout the European Community. We are talking about competing not just with Germany, America and France but with the fast-developing economies of the far east and, behind them, south Asia and Latin America.
Too often, the rise of the far east tiger economies is seen simply as a challenge to our way of life. That challenge certainly exists and increases the need for a flexible labour market and for an economy in Britain and Europe that fosters innovation and efficiency. The rise of Asian prosperity also presents a tremendous opportunity because it means that hundreds of millions of people in the world are now beginning to have the opportunity, for the first time ever, to buy consumer goods and services that people in western Europe have generally taken for granted for many years. It would be an act of madness for the European Community to connive at policies of protection that would cut us off from those millions of customers precisely at a time when we should be able to sell them the goods and services that we produce.
My right hon. Friend the Prime Minister referred in a celebrated recent article to some of the current preoccupations of the European Community as having all the quaintness and degree of efficacy of a tribal rain dance. The image that comes to my mind when I look at some of the goings-on in Brussels is one drawn from Galsworthy. It is of a group of elderly Forsyte aunts with a rather complacent view of past success and present wealth punctuated by the occasional querulous and disapproving comment about all those uncouth, self-made men in the new neighbourhood down the road who are rather getting ideas above their station. That is too often the reaction of EC civil servants and political leaders in some of our partners countries to the challenge and opportunity in the far east.
The Budget will be of great benefit to Britain's recovery from recession. Clearly, too, the continued prosperity of the British people does not rest alone on the Budget and the measures that will follow it. It rests perhaps above all else on the success of my right hon. Friends in fighting a battle of economic ideas both in the United Kingdom, against the forces of reaction on the Opposition Benches, and on a European scale—a battle for deregulation, for free markets and for free trade. I wish them well and I wish them every 1240 success in that task, for the prosperity of our nation and of the entire European continent depends crucially on their success.
§ Ms Glenda Jackson (Hampstead and Highgate)
It is with some pleasure that I follow the hon. Member for Aylesbury (Mr. Lidington)—not because of the logical cohesion of his speech, but because of his disingenuousness in asking the Secretary of State for Employment to ensure that job seekers will welcome an agreement chat will be imposed upon them, knowing that, if they refuse to sign it, they will not have their benefit reduced by six months but will receive no benefit at all.
As a Member who represents a London constituency, I awaited this year's Budget with some anticipation, not least—despite initial difficulties in obtaining a copy—because of the consultation document produced by the Secretary of State for the Environment earlier this month, entitled "London, Making the Best Better". I had read with interest how the Government would deal with crime in our capital, raise standards in education, improve housing and the transport system and, in the words of the Secretary of State,ensure a fair and open society for people of all backgrounds.It was therefore with some regret that I noted the difference between that document and the words uttered by the Chancellor of the Exchequer.
In my constituency—unlike that of the hon. Member for Aylesbury—unemployment is at heights that have never before been recorded. In some parts of London, unemployment is above not only the national but the European average, with 22, 26 and, in some parts of London, as many as 37 job seekers pursuing the same job.
Earlier this afternoon, the Secretary of State for Employment stated that the whole purpose behind the job seeker's agreement was to ensure that the job seeker pursued a job with all possible effort. As we are now a full member of the European Community, that presumably means that British job seekers will be expected to seek jobs on the continent of Europe. I wish that I had had the opportunity to ask the Secretary of State whether the financial provision that would make that possible will be furnished even though unemployment benefit is to be reduced.
Getting to the continent—indeed, getting around our capital city and these islands—is becoming increasingly difficult if one depends on public transport. The Chancellor pledged that British Rail and London Transport investment would be maintained at levels substantially higher than in the 1980s.
I am sure that no hon. Member will need to be reminded of which Government were responsible for the scandalously low levels of investment to which the Chancellor referred; nor that investment in our rail network is lower than it was in the 1970s, the 1960s or the 1950s; nor of the response of London Underground to the Chancellor's announcement about their forthcoming levels of investment. London Underground stated:There is not a limitless seam of self improvements to be mined and only so much can be achieved with an aged system, where many assets are way beyond their design life.Compare that with the words of the Secretary of State's glossy brochure:London is developing to meet the challenges of the next century. Next year, Parisians will be able to get to London in around three hours using the Channel Tunnel.1241 What fantasy world is it that the Secretary of State is thinking of in which chic Parisians are whisked to and around a modern vibrant London on a modern state-of-the-art transport system?
Suppose that Parisians wished to visit London—and, following the kind and welcoming words that the Secretary of State for Social Security uttered at his party conference, what foreign national would not wish to visit this sceptred isle—what sight would greet them? Air that one can chew on, doorways that double as bedrooms and a transport system parts of which were designed not for the 21st century but in the 19th century.
Were Ministers out of the country last Thursday and Friday? Did not they witness or were not they told of the chaos which was caused when a fault in a 70-year-old cable—a cable laid before most of the Government were even born—shorted out and plunged half the underground system of our capital city into chaos and darkness?
Following that incident, I contacted officials of the Northern line, which serves my constituency. The officials informed me that that line has cables of a similar age and condition across their network. The officials added that, earlier in the previous month, a train had derailed near Balham, when more than 1,000 yd of track disintegrated. They added that, due to a lack of resources, the modernisation of a line that first opened in the 1890s would have to be shelved.
Today, the British Tourist Authority stated in the Evening Standard that investment in the Northern line—because of its link with the new Waterloo terminus—was vital for tourism in the capital. What has been the response of the Government to those derailments, power failures and continously shelved projects? The response has been to underfund London's transport budget in 1994-95 by £400 million.
How on earth can that be regarded as making the best better? Sixty per cent. of the signalling on Network SouthEast must be replaced within the next 10 years, and 2,000 miles of track must be renewed to avoid increased journey times. Over one quarter of the network's 6,000 coaches need to be replaced by 2002.
What was the Chancellor's response to those requirements? He cut investment in the rail industry by £247 million. Yesterday, the Chancellor was referred to in a number of media broadcasts as "the magician". That is clearly because he has completed the feat of sawing in half Britain's railway investment. Unfortunately, this feat is no illusion, and the pieces do not come back together again.
We heard a great deal yesterday about the burden that the nation is shouldering as a result of the public sector borrowing requirement. The Chancellor said that his overriding task was to place public finances on a sound footing. We heard nothing about the costs to the economy and to the Exchequer of allowing our transport system to decline to rack and ruin.
Perhaps, when the Minister winds up, he will outline how much revenue the City of London loses every year as a result of traffic congestion. Perhaps he would like to outline how much it would cost London Underground if all those who were trapped during last week's failure claimed compensation under the citizens charter.
Perhaps the Minister could estimate the attractiveness of the Central line to a foreign investor who is weighing up 1242 whether to sight his business in this country or in another European capital. Perhaps he could explain the environmental benefits of a road-building programme which will cost the taxpayer more than total expenditure on the railway industry, London Transport and the Civil Aviation Authority.
On Tuesday, the Chancellor claimed that any critic of the Government's car tax who claimed also to support the international agreement to curb carbon dioxide emissions would be sailing dangerously near to hypocrisy. I would respectfully suggest that any Chancellor who claims to support both public transport and the environment, and who then embarks on a £2 billion road programme, has sailed so far beyond hypocrisy as to be now watching it vanish below the horizon.
The brochure "Making the best better" is littered with the phrase, "What is going on?" Probably that is the only phrase that is applicable both to that document and to the Budget. What indeed is going on in relation to the Government's transport strategy and their policy, such as it is, towards unemployment? I think that hon. Members and the people of this country have a right to be told.
§ Mr. Geoffrey Clifton-Brown (Cirencester and Tewkesbury)
I am grateful to you, Mr. Deputy Speaker. I know that other hon. Members want to speak, so I will attempt to be brief. It is good to follow the erudite speech of the hon. Member for Hampstead and Highgate (Ms Jackson), but I suspect that in my remarks we shall part company.
Any prudent Chancellor should set himself realistic objectives, and then expect to be judged by them. The present Chancellor set three key objectives—sustainable recovery, a climate for jobs and for growth, and low inflation. He said that the Budget would achive those, and would ensure sound public finances to secure a lasting recovery and rising living standards.
The Chancellor is to be congratulated on delivering a Budget that is capable of delivering all of those objectives. The previous Chancellor, my right hon. Friend the Member for Kingston upon Thames (Mr. Lamont), left two important legacies. The first was the unified Budget, which combined spending and tax raising, and the second was the separation of revenue and capital expenditure. The first of those is important, because it has ensured that economic management is now more efficient.
My right hon. Friend the Chief Secretary to the Treasury is to be greatly congratulated on holding public expenditure at the level he has simply by tightening the use of the contingency reserve, which is normally available as a surplus to Departments at the end of each year. The second is important because for far too long this country has spent too much of its wealth on consumption and not enough on capital projects.
In that connection, I warmly welcome the maintenance of the capital programme at £22 billion over the next three years. Unlike the Labour party, our Chancellor decides what is prudent to spend and then decides how to raise the funds. Labour does exactly the opposite. It thinks what it might like to spend, and then decides which taxes to raise to pay for that.
I warmly welcome the fact that the PSBR will shrink as a proportion of GDP from 7.5 per cent. this year to almost zero by the end of the century. That will be a remarkable 1243 turnaround in the economy, which, when it is achieved, will take us to a situation similar to that which pertained in 1989–90. That can only be achieved by the fiscal responsibility shown by the Chancellor in the Budget and by holding public expenditure at a tight level.
To the dismay of the Labour party, and contrary to all the speculation before the Budget, we have not increased or widened the scope of VAT, with the small exception of putting VAT on insurance premiums. At the same time, there is a generous package of measures to help those who are less fortunate than ourselves—the sick, disabled and unemployed. I did not notice the Opposition giving one cheer of welcome for any of the measures. I have not noticed one shred of welcome for the fact that the Government have managed to fully uprate all benefits for inflation.
I was particularly pleased that the Chancellor announced a package of granny bonds, for which I have called for some time. I have constituents who have worked hard in fairly lowly jobs all their lives and who have saved a small amount which puts them above every benefit. They will take up these bonds with alacrity.
My constituents will also welcome the environmental fiscal measures which the Chancellor introduced in the Budget. The doubling of the home energy efficiency scheme is particularly welcome. The hon. Member for Greenwich (Mr. Raynsford) is present. He and I, along with other hon. Members, have taken part in an energy efficiency inquiry by the Environment Select Committee. Our report said that, if we do not improve our housing stock, and particularly the energy efficiency of the stock, it will be like pouring carbon through a sieve. We must continue to ensure that our housing stock is more energy-efficient.
The human element in this is more important. The fuel bills of people on low incomes will be cut, so they will have much more of their income from benefits, or wherever else they get their income, to spend on other things.
I wished to concentrate my remarks on the measures for small and medium businesses. There are 1 million more small businesses today than in 1979. They have been the main contributor to the 1.3 million extra jobs to which the Secretary of State for Employment referred. Those businesses will continue to be the engine for growth in the economy.
I warmly welcome the package of measures for small businesses. I particularly welcome the fiscal measures—the raising of the VAT thresholds, the exemption of small firms from corporation tax, enterprise investment schemes, venture capital trusts and the new apprenticeship scheme which was announced this afternoon by the Secretary of State.
Businesses will be helped by the involvement of the private sector in large-scale public infrastructure projects. My constituents will particularly welcome the upgrading of the west coast main line, in which many firms in my constituency will hope to participate.
Even more than the fiscal measures, I welcome the deregulation measures for small businesses. In that respect, my right hon. and learned Friend announced four major measures. First, he said that he will look carefully at harmonising the tax and national insurance arrangements for employers. I would go further than that, and have a Government agent as a link man between all Departments and businesses.
1244 When the VAT man came to inspect my books the other day, I told him of that idea, but he said that I could not expect a VAT man to be an expert on income tax, employment law and everything else. To which I replied that I was expected to be an expert on VAT as well as many other things. The costs to businesses could be cut by such an arrangement.
Secondly, I warmly welcome the limited audit requirements. As my right hon. and learned Friend has already announced, they mean that, with turnover between £90,000 and £300,000, companies will require an independent accountant's report, and below £90,000 none at all.
I have just one caveat which I hope my hon. Friend the Economic Secretary will bear in mind this evening—that creditors could be at risk. When the measure is introduced, I hope that those businesses will be required to add a caveat on their invoices, letterheads and quotations so that all their creditors and customers know precisely with what type of businesses they are dealing.
Thirdly, and most importantly, I warmly welcome the proposals on the late payment of debts. That will be difficult to achieve, but if a workable solution can be found, it will enormously improve the cash flow of many small and medium-sized businesses.
Fourthly and finally on these deregulation measures, I welcome the self-declaration and assessment measures for paying income tax. I particularly ask my right hon. and learned Friend to study other models in the world. I fear that there is a danger of the new system becoming even more complicated than the present system. In particular, I ask him to look at the American model, which is relatively simple and which I believe collects most of the tax due, which is surely the test that the measure will have to pass.
My right hon. and learned Friend has delivered a Budget to restore public finances and enterprise, which drove this economy during the 1980s to such success, and that against a background of low inflation, low interest rates and low unit wage costs. No wonder the markets have reacted so well during the past few days.
Under this Government, the economy will go from strength to strength as it is the only growth economy predicted this year and next year in Europe.
§ Mr. Alan Simpson (Nottingham, South)
I was particularly fortunate in having been given a sneak preview of the Chancellor's Budget speech about a week before it was delivered. I happened to be on a tour of a pools company at the time and we had reached the point where it kept its records of the major cock-ups in the industry.
I was shown a picture of a spot-the-ball competition which was run in a regional newspaper where, inadvertently, the ball had not been deleted. Fortunately, some eagle-eyed person on the paper had spotted that and alerted the company. Right next to the advertisement was a huge disclaimer telling the readership and the punters that the promoters had made that cock-up, that they were terribly sorry, that they would not be running the competition that week and that they hoped that people would understand.
In the following week's edition of the paper there was a story pointing out that, despite the disclaimer, 10,000 1245 coupons had been returned—all missing the ball. I realised that I was being given a preview of the Chancellor's Budget statement, one week later.
The Chancellor was presented with a picture on which the ball was firmly planted. Not only that, but in large letters across the ball was written the word "jobs". In case the Chancellor missed that, one could see, hanging on the lips of the crowd behind the word "jobs". But he faced a dilemma because his party had already submitted its coupon and the crosses were all clustered on another part of the picture, so what was he to do? The Chancellor knew that those crosses would be the crosses that were cast in the future leadership election of the Conservative party. But the ball was somewhere else. It did not matter that his party was as disconnected from the game as they are from the real world outside; he had another agenda. So, like the magician that he is reputed to be, he put another ball in. He put it in the middle of the crosses that mattered, the crosses that belong on the Conservative Benches, and ignored the crosses that his Budget statement will impose on the backs of the British people.
I wondered, if the Chancellor had had the vision or the courage to see where the ball was, what he would have said. What would he have said if he had really been prepared to deliver a Budget statement that addressed the issue of jobs?
Well, today he would probably have insisted that we began the proceedings not with a debate which outlined how local authorities would face cuts and capping, but he would have been telling those local authorities, "Look, we are in a mess. I want you to go out and build and improve houses. I want you to go out and take the jobless off the dole so that we can take the homeless off the streets. That's what this country needs you to do. That's what I need you to do. We are going to build our way out of the recovery." That is what a Chancellor who was committed to jobs would have said.
The Chancellor would then have told engineers and designers in manufacturing, "Do us a favour, will you? Build us some buses. I am fed up with these milk floats rattling round our cities, congesting the roads where we used to have decent integrated public transport systems, with buses that we used to build ourselves. We are a Government who are in the business of buying buses and we want a manufacturing industry in Britain that is in the business of building them." The Chancellor would then have gone to the mills and said, "We need some steel. We need rolling stock for the railways. We need rail investment to match that in France, Germany and Japan. That is what the future of a manufacturing base of a Britain fit for the 21st century must be built on."
The Chancellor would have gone to the pensioners and said, not on a token basis but on a comprehensive basis, "We will come up with a plan to insulate your homes. It must be energy efficiency for all or none at all. We need such energy efficiency work because it is labour intensive. We can take people off the dole and give them skills and jobs as well as saving pensioners' lives. And while we are at it, you can forget about VAT on domestic fuel: it was a cock-up of our own, so let us ignore it if we can—least said, soonest mended."
The Chancellor would have gone to parents around the country and said, "You were absolutely right to demand a 1246 nursery place for every child that wants one, because they found in America that juvenile crime was best deterred in those areas where they invested in pre-school nursery care and education for all children. That is what we know we need to be doing here". The Chancellor would have said, "I can guarantee a Budget that will put books in the classrooms, in schools with roofs that do not leak any more".
As for the national health service, the Chancellor would have said, "We shall not be conducting this argument between the trusts or local hospitals and the district health authority, where they are left making decisions about shoving patients in critical states of health into the back of ambulances and sending them careering round local roads trying to find a bed that has a nurse to go with it. We shall be providing you with additional funding for the nursing staff that is needed to run our intensive care units properly within a properly staffed and resourced NHS."
If the Chancellor had wanted to be an environmentalist and an internationalist, he would have gone to the miners and said, "Look, we are really worried in Britain. Only a month ago the Government of the Ukraine reversed a decision to close down the remaining three parts of the Chernobyl reactor. Why? Not because they thought that it had suddenly become safe, but because they knew that they could not survive the winter without energy from those reactors. They know that they face a major environmental catastrophe. We know that they face a major environmental catastrophe." Three or four more Chernobyls would come across national boundaries and show no respect for Governments who have said, "It's nothing to do with us." The Government should be saying to the miners, "For God's sake lads, get down the mines and dig them some coal." We can afford to give them the coal. We need to give it to them because the choices in relation to environmental catastrophe are also our choices. The Government should also say to the miners, "While you're digging that coal, if there's any left over, pass it out among the pensioners until we get round to insulating their houses."
We did not get any of that in the Budget—instead, it took money out of the economy. Clearly, that will be deflationary and the problems of deflation will be borne by those who have least. It is a Budget under which the majority of people will pay for the recuperation of the rich. The period of unemployment benefit is to be halved, with no jobs at the end of it. The sick are to be taxed because they happen to be sick. Those with home insurance are to be taxed because they happen to have been burgled. Car owners will be taxed because they happen to have had their cars stolen. A Government who purport to be tough on crime will say "Tough" to an electorate who claim that the taxes are manifestly unfair. There is to be no strengthening of the position of the victims of household or car crime. Instead, they are to be punished for being the victims of the very crimes about which the Government wax lyrical when they talk of being tough and cracking down on crime.
The Chancellor tried to pretend a sense of evenhandedness in the freezing of tax allowances, as though that was somehow neutral and there was no inflation in the economy. Life goes on and, unfortunately, such hidden taxes also go on. The idea of standing still and being neutral is absurd. It is a little like presuming that if we stood still on the deck of the Titanic we would all be fine. Sooner rather than later, someone would say to the person 1247 next to them, "It's still going down." That is precisely what is happening in the British economy—it is still going down.
This part of the Budget amounts to little more than a series of windfall taxes for the Treasury. It would have been better if the Chancellor had said that. He will soon find himself the recipient of the deferred taxes that were provided for last year. They will soon start to roll into his coffers. The stand-still taxes will magically appear and fall in his lap. It is not magical, it is not divine and it is not an act of God; it is the act of a Chancellor who is not being honest about where and how he is raising his taxes. If nothing else, the right hon. and learned Gentleman has come close to resorting to the notion of immaculate taxation as a way of raising money.
I want to be sure that the House is clear about the proposed public spending cuts. There is no fat left on the bone of local government spending. There will be service cuts, which will mean job cuts which will result in rising unemployment and further calls on the Exchequer to pay for that. Goods will be in the shops but there will be no money in people's pockets to purchase them. Even by Tory standards, this threatens to be the shortest so-called recovery on record.
In response to criticism, many Conservative Members have asked, "What would Labour do?" It is not for me to offer a Labour manifesto, but I want to offer some ideas that this House and the Labour party should consider. We should not be apologetic about mentioning them. First, we should thank the Chancellor for the unified statement. It helps us to move forward and to deal with the areas on which we propose to spend money while identifying the areas from which to raise that money. It is not just about clearing deficits; it is about what we could do constructively with the wealth that the Government raise and use on behalf of the people.
However, we must point out that the Government have been forced into that position because after 14 years of their being in power the country is in deep economic trouble. The main conclusion to be reached is that reliance on the free market has been a catastrophe. Inasmuch as it is about putting Britain back to work, it has not worked at all. The Labour party should not collude with the myth; it should not endorse it as a notion worth considering. Instead, it should point in a quite different direction.
Labour should say quite simply that as a party it is unashamedly committed to progressive taxation. We should ask people to contribute on the basis that the more that they earn, the more they are able to pay. We should ask least from those who are least able to contribute. The progressive tax hand-outs to the wealthiest in society during the 1980s should be first among the targets of an incoming Labour Government. That source of revenue could be better deployed than being given to those at the top end of the income scale who have taken the money and done a runner.
We should begin with the notion of a 50:50 tax. All those earning more than £50,000 a year should be asked to pay at least a 50 per cent. rate of tax. That would raise about £4 billion a year. We should also think about what to do with empty properties. The Government like to say that they forced local councils to use empty properties, but we never hear any mention of the empty offices that litter our cities. Their owners get away with writing off money that should be going to the public purse. They should pay 100 per cent. of the unified business rate in the first year. 1248 In the second, that would be multiplied by itself. In the third year, it would be multiplied to the power of three. There should be a premium on putting the office space in our cities into productive use. Those who are happy to sit on those empty properties and leave them unused while people are scratching around to find premises from which to operate businesses are acting against the public interest.
Whenever the Government are in difficulty, they do not tackle the problem—they simply move the goalposts. A future Labour Government should study how the public sector borrowing requirement is defined. Rather than using local authorities as regulators of the economy, it is time that Britain embraced a different relationship between central and local government—something that is far better understood on the continent. Local government should have a degree of autonomy. Its borrowing should be based on its capital assets, with the requirement only that it balances its revenue accounts. It should function as a municipal enterprise. We should separate local and central Government borrowing and take those figures out of the PSBR.
We should also recognise the commitments of our party conference and commit this country to a level of defence spending equivalent to the European average. That would mean a PSBR recycling of £8 billion. Germany, despite its reunification problems, is still the strongest economy within the European Community. Its defence spending is 1.9 per cent. of its gross domestic product. If this country recycled its defence spending in the way that Germany has done, that would release funds equivalent to the entirety of manufacturing investment in the United Kingdom. A sum of £13 billion would be freed for productive investment in our manufacturing base. If Germany can do that from a position of strength, why cannot this country do it from the position of weakness?
I thought that the Chancellor's tax on flights was a novel idea. Bill and Betty on their way to Benidorm will pay an extra fiver, or about 3 per cent. of the cost of their return flight. I thought that the idea had something to commend it. If flights by passengers can be taxed, why not also tax the flight of capital? I asked the Library how much a 3 per cent. tax on that would produce. I was told that it would produce a massive sum, so I scaled down my original figure.
No less than £40,000 billion of speculative capital moves through the London foreign exchange market each year. If a tax of one eighth of 1 per cent. were levied on that amount, it would bring the Chancellor revenue of £50 billion. Even a Conservative Government would be hard-pressed to lose all that in one year. Why spoil the summer holidays of ordinary people but be terrified of spoiling the speculative holidays of the City of London?
An incoming Labour Government would need to know that the biggest threat facing planned recovery is the permanently deregulated financial markets—markets which have the power to undermine any serious, sensible investment programme aimed at delivering economic recovery based on full employment. An incoming Labour Government would need to examine the ways in which capital has restructured itself on a European scale over the past 15 years, and to understand why a Conservative Government no longer needs to rely on finance from manufacturing. Their source of revenue and political support is international capital, which does not give two hoots about jobs in this country. 1249 The Secretary of State mentioned the concept of jobless growth. At best, that is what faces us now. So long as we rely on the financial markets in the City to determine the pace and direction of economic policy, there will be no jobs in any growth package that emerges from this Chamber.
When the dust settles on this Budget, the British public will realise that the poor will be poorer, the homeless will still be homeless and this country will still be importing goods and exporting jobs. Far from having a Chancellor who is a magician, a one-in-a-million person and a visionary, we have a Chancellor who merely is one of the 10,000—a Chancellor who could not see the ball when it stared him in the face.
§ 9.1 pm
§ Mr. Peter Ainsworth (Surrey, East)
The hon. Member for Nottingham, South (Mr. Simpson) made a number of points that I would have mentioned, had I more time. The hon. Member for Kingston upon Hull, East (Mr. Prescott) was referred to earlier as neanderthal man. He seemed to take pride in that and was right to do so. By comparison with the hon. Gentleman, neanderthal man was advanced. The hon. Member for Nottingham, South, if not neanderthal man, was certainly homo erectus.
The failure of Oppposition Members to present any constructive ideas is the most distinguishing feature of the debate. We are used to them opposing Government policy, but they owe it to themselves and to their supporters to present a constructive view of their economic policies. We all have the message that they do not like the Budget—that is abundantly plain—but neither we nor the country know what are the Opposition's economic policies and how they would tackle the nation's deficit.
We heard many complaints from Opposition Members about the deficit, but have they ever asked themselves how it was created? It is the result of Government spending in areas that matter deeply to millions of people, including substantially increased health spending and increased expenditure in real terms on education in recent years. The Opposition must come clean: would they rather that money had not been spent? If they wanted that money spent, how can they oppose the Budget? That poses the Opposition with a real problem, and that is why we have not been given their answer.
I hope that in a moment we shall hear some constructive points from the Opposition, but the truth is that in their reaction to the Budget they have.shown that they are bankrupt of any ideas for dealing with the deficit.
My right hon. and learned Friend the Chancellor has approached the problem in a balanced and sensible way. If there is a deficit, it is because the Government are spending too much money and therefore it is right that the burden of the Budget should fall on that Government spending. That is appropriate. It is also necessary to raise takes in order to create a balance and to sustain increased spending on important things such as health, education, and so on. I am sure that Opposition Members would agree with that. So why are we suddenly seeing the most massive volte face of modern political times with Opposition Members failing to approve the Chancellor's tax plans?
I shall continue to live in hope that some Labour or Liberal Democrat Member will propose a positive plan for 1250 dealing with the economic situation in this country. They owe it to us, their supporters and to the country at large to do that. Conservative Members are the only politicians who have answers to the problems that Britain faces today, and the country understands that fact more and more as time goes by.
§ 9.5 pm
§ Mr. Frank Dobson (Holborn and St. Pancras)
I am glad that the Chancellor of the Exchequer is present. The Budget, as with every Tory Budget, was greeted with glee by Tory Back Benchers. It always reminds me of Walpole's statement that today they may be ringing the bells, but tomorrow they will be wringing their hands.
This Budget, as with every preceding Tory Budget, unravels day by day and week by week. It is becoming increasingly clear that this Budget will force people to pay more and receive less in return. It certainly breaks yet more Tory election promises. Nowhere is that more true than in London. From April this year, London's 1 million pensioners will have to pay VAT on fuel and the Chancellor's compensation will not make up for that—50p is not enough. The cuts in funds for housing associations will mean that fewer houses are built in London so that more families will be left homeless or, almost as bad, left living with their in-laws. The cuts in Government funding for local councils announced today will mean that services will be reduced and council tax bills will rise. Many of London's 500,000 people who are out of work will face having their unemployment benefit stopped after six months having paid in for years on the understanding that they would be covered for a year. That is a case of the Government doing a Maxwell.
Children in London's schools face losing teachers, books, equipment and school dinners as a result of the Government's reduced funding for London's desperate schools. The rents of tenants of councils and housing associations will be forced up. Londoners will pay more insurance tax than people in other parts of the country because the premiums for household insurance are so much higher in London.
Those are all examples of people having to pay more and receiving less. It would appear that short changing the public is becoming official Tory policy.
London Underground is becoming a sick joke. Every day passengers experience delays and disruption. Every day they climb emergency stairs because lifts and escalators are not working. Every day somewhere on the underground system the signalling goes on the blink and millions of gallons of water seep into the tunnels. Deep down, tube travellers fear that one day that water will gush in rather than seep in. Last week a cable failed and closed down a substantial part of the system. Parts of the cable were said to be 70 years old. The younger parts, if that is they way to describe a cable, had been there for at least half a century. The average London Transport train is 24 years old. A quarter of the signalling equipment was installed 40 years ago; and, if people want to put that into perspective, 40 years ago England had never lost to a foreign team at Wembley.
The whole system is falling apart. Many passengers get a poor service. Staff are sick to death of taking the blame for all the inadequacies. With maintenance problems rising, fewer staff are being employed on vital maintenance work. 1251 Things are going from bad to worse, but what do we get in the Chancellor of the Exchequer's Budget statement? The Sir Humphreys worked on it carefully. It was worded thus:London Transport's investment programmes will be maintained at levels substantially higher than in the 1980s."—[Official Report, 30 November 1993; Vol. 233 c. 25.]My only response to that is, "I should hope so," but that is a cut in what was most recently promised. It is also a cut in what was promised in the Conservative party election manifesto, which said that £3,500 million would be invested in the Underground over the next three years. The Chancellor has broken that promise.
The most recent promise was to make £964 million available for investment in the tube system. The new figure is down to £900 million, but the real position is worse than that. Most of the money we have heard about will go on new projects. The money that is left to be invested in the existing system—the one that passengers have to use, which is falling apart—has been cut from about £525 million to £325 million. That represents a cut of £200 million, or 38 per cent.
I emphasise that that is a cut in spending on the shambolic system that is in existence. Every pound that is removed from that total results in more misery on the misery line, more breakdowns, more delays and more people stuck in tunnels and labouring up emergency stairs. That is what tube travellers face, even if it is not experienced by Ministers going round in their chauffeur-driven cars.
It may have been the fear that their chauffeur-driven cars might be delayed that caused even this Government to defer their proposal to deregulate London's buses. Bitter experience in other cities apparently revealed to them that bus deregulation could result in gridlock from Hackney to Hounslow, and would be unpopular with voters. Instead of fully abandoning that crackpot scheme, however, the Government say that they have just postponed it. Instead, they are to force London Transport to sell off its bus operations.
Until now, London Buses has had to compete with private would-be franchisers for franchises on various routes, but apparently it has been too successful. In open competiton, it has been winning too many franchises for the routes. That public sector competitor is to be closed and forced to sell its assets. When that happens, assets are always sold off at knock-down prices. I remind the Chancellor that takings for the Treasury from privatisation have been roughly half the book value of the assets of each nationalised industry.
It is worth reminding the Government, who say that they are promoting tourism, that today the British Tourist Authority has expressed concern about the possible disappearance of the red bus from London. It says thatit is a symbol of London, which is recognised all over the world and an immensely valuable promotional tool.Presumably, in future, brochures sent out by the authority to get people from around the world to come to London will contain photographs of buses of many colours instead of the red bus. Have the Chancellor and the Secretary of State for Transport considered the impact on tourism and tourism promotion of getting rid of the red London bus?
One thing does not come at a knock-down price—the cost of travelling, not only in London but throughout the country. From January, passengers on London Underground, London Buses and Network SouthEast face 1252 average fare increases of 6 per cent.—three times the rate of inflation. That is another example of people having to pay more in but getting less back. The same increases will apply to many other railway passengers.
Will those other passengers get a better service? It seems unlikely. On some lines there has been a deliberate deterioration in the service following the introduction of the passengers charter. The journey times in some timetables have been lengthened so that a train that takes one hour 20 minutes for a journey is arriving on time; under the previous timetable, if it took one hour 20 minutes on that route, it would have meant that it was arriving 10 minutes late. It now meets the charter's requirement, so apparently everything is well.
Somewhere in the Budget figures, the Government will have hidden away the cost to the taxpayer of rail privatisation. They have managed to hide it until now. but it will come out eventually, and it will be money from the taxpayer and passenger, not a penny of which will be spent on improving services. Instead, it will be diverted into the pockets of merchant bankers and motley crews of City consultants.
As my hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott) said, this is yet another Budget for the City. People in the City have been the principal beneficiaries of the Government's privatisation programme, and they have also done rather well out of our usually abortive efforts to involve private sector finance in railway projects.
All those projects have several things in common. They are announced with a fanfare of trumpets, and then they are re-announced time and again, by press conference, press briefings or official leaks. That is intended to achieve the impression that something is happening, and that Tory Ministers are skilled in negotiations. It would be hard to get further from the truth.
The Chancellor of the Exchequer and the Secretary of State for Transport were at it again yesterday and the: day before, about the west coast main line. When the Tories came to power, that line, which links London to the major industrial and commercial centres in the west midlands, the north-west and the west of Scotland, was the most modern electrified railway in Britain. Today it is a national disgrace. It needs to be upgraded, but nothing has been done.
In his Budget speech, the Chancellor said:the Government are today giving the go ahead to three substantial new transport projects…the refurbishment of the west coast main line…linking some of the biggest cities in the country—London, Birmingham, Manchester, Liverpool and Glasgow."—[Official Report, 30 November 1993; Vol. 233, c. 930.]He carefully did not mention that not a penny piece of public money is going into the scheme, or that the improvements might well be confined to the line south of Crewe, or that nothing has been decided, no commitments have been entered into and no contracts have been let.
The Secretary of State for Transport announced yesterday that Railtrack would be "inviting expressions of interest" and that, in late 1994, a competition would be held to select a private sector outfit to modernise the west coast main line, but from Euston to Crewe only. Even if it all goes ahead, therefore, it will be another two years before the work starts on the ground. It will probably be the 21st century before any passengers see any improvements, and the Transport Minister warned yesterday that it will lead to higher fares. 1253 All that was announced, with the usual fanfare of trumpets, as good news for the passengers, the railway supply industry and the taxpayer. There was the usual talk of its having top priority, competition's doing the work and a great commitment to driving it forward. Everyone who uses the line hopes that the project will succeed, but all this circus has happened before, and people will believe it when they see it.
It really has happened before. Five years ago, in late 1988, the Government and British Rail announced what they calledfirst steps towards private sector investment in the Channel Tunnel rail link".They were "inviting expressions of interest" and they proposed to hold a competition, so that someone from the private sector would build the line.
A year later, the then Transport Secretary, Cecil Parkinson, said that a preferred partner had been chosen—Eurorail, made up of Trafalgar House and BICC. It still needed the Government's final agreement, but Mr. Parkinson said that he wasencouraged by the clear indications that the link could be financed commercially and brought into operation by 1998.As everyone knows, that scheme fell through. Nothing has been done, and the completion of the channel tunnel link will be delayed to the year 2003.
When, two weeks ago, the Secretary of State announced that he was having another go at getting private investment in the channel tunnel link, we were back to expressions of interest and the idea that the Government might hold a competition.
Five years ago, when Cecil Parkinson made that prediction, the development of the channel tunnel scheme was at exactly the same stage as that of the west coast main line yesterday. Five years later, not a damn thing has been done. To say the least, the Government's track record is poor. They may make that approach work this time, but they may not.
The people, the industry and the commerce that depend on the west coast main line deserve better than that. That line is a major economic artery, and its future should not be decided by a private sector lottery. Strategic decisions are matters for Government. The work is needed and it must be done. How it is financed is secondary—just as the finance for the improvements in the east coast main line was secondary.
Why should people who rely on the west coast line not get the same treatment as those who rely on the east coast line? Clearly a commitment is needed from the Government; the absence of their unswerving commitment adds the sort of uncertainty that private investors are desperate to avoid.
Then there is the crossrail project for London. That is announced and reannounced with such regularity that it is rumoured that some Transport Ministers now believe that it has been built. But it has not, despite all the Budget promises to the contrary. The project is falling behind, not getting ahead.
Next there is—hallelujah—the Jubilee line extension, which has been on and off for years. Its construction apparently depended on whether the property speculators at Canary Wharf came up with the £400 million that they had promised. That may have sounded generous of them, but we must bear in mind the fact that their speculative 1254 development at Canary Wharf had already received more than £350 million in subsidies from the pocket of the taxpayer.
In the end, after long negotiations, the Government announced that the developers could manage to come up with a contribution of £300 million. However, that was not as good as it looked, because Ministers had not allowed for inflation. I am a simple soul, and I asked whether inflation had been allowed for.
I found out that the figure of £300 million that the Government had trumpeted—the Chancellor ought to pay attention to this, because it could affect his calculations—is to be paid over a 20-year period, starting on the day that the Jubilee line extension comes into operation, whenever that may be.
Its value will not be uprated for inflation, so if inflation averages 4 per cent.—the top of the Government's target range—over that 20-year period, the real value of the private sector contribution will have halved, to £150 million. If inflation averages what it has averaged over the past 20 years—9.7 per cent.—the private sector contribution will be worth about £70 million.
If that inflation rate of 9.7 per cent. were to prevail for 20 years and, because of stupid negotiations by the Government, the money were to be paid in the final year of the 20-year period, the private sector contribution would be worth precisely £20 million of the £400 million originally promised. With that sort of track record, one would not want the Secretary of State for Transport even to sell one's used car.
That is not the end of the story. One of the principal merits of the Jubilee line extension, in all the cost benefit analyses—[Interruption.] The Chancellor of the Exchequer says that I am being ridiculous. Apparently he believes that it is right for the taxpayer to have to pay for the project at current values when the money is invested, but does not believe that the private sector should have to match that. In that case, he is not fit to be Chancellor of the Exchequer.
§ Mr. Kenneth Clarke
The Jubilee line extension is, of course, the first major investment in the tube since the Victoria line was built some years ago. We shall invest more than £1 billion in the core London Transport underground over the next three years, and another £1 billion-plus in the Jubilee line.
That is about half as much again as we used to invest in the 1980s, and about seven or eight times as much as used to be spent by that ridiculous body, the Greater London council, which allowed the Underground to decay, and presided over the old wiring, the overmanning and the declining service. Supported by the hon. Member for Holborn and St. Pancras (Mr. Dobson), the GLC preferred to spend its money on buying votes by keeping down bus fares. That was Labour's contribution to transport infrastructure in London.
§ Mr. Dobson
The Chancellor of the Exchequer in his present role ought to know that the Greater London council asked to invest more money, but was prevented from doing so by the Ministry of Transport and the Treasury. Indeed, the Chancellor may have been one of the Ministers who refused to give the GLC the permission.
One of the principal merits of the extension of the Jubilee line was to be a station at north Greenwich that would have allowed people from south-east London the 1255 access to the tube system that they are presently denied. Although the north Greenwich station was listed in the Secretary of State's press release, as one would imagine, and featured on the map published with the press release, there was no commitment to build the station. The line will go through north Greenwich, but the station will not be built because it is dependent on raising some other private sector money and the Government have not quite got round to it yet.
There was another attempted con about transport in London in the Budget. The Chancellor said:the Government are today giving the go ahead to … the extension of the docklands light railway to Lewisham".—[Official Report, 30 November 1993; Vol. 233, c. 930.]That was partly true, but not the whole truth, because it is not the scheme that was originally announced. It is minus two important stations, which were left out for the most compelling of Tory reasons—they cannot get private sector help to build them. That brings the cost down, but reduces the usefulness of the line.
Rail schemes are not the only example of the incompetence of the Department of Transport. Its biggest spending programme is the roads programme and thus where its greatest incompetence is to be found.
The recent National Audit Office report shows that money from the roads programme that was spent on motorway widening has been squandered. Since 1989, the cost of motorway widening schemes has shot up by 46 per cent., and the National Audit Office estimates that it is likely to increase by over 78 per cent. by the time that the schemes are completed. Of the 18 schemes completed so far, 10 were investigated in detail by the National Audit Office and, on average, those 10 had cost double the original estimated cost. That is a disgrace.
We welcome the belated decision to reduce spending on the road programme, but call for some changes in its priorities. There is an opportunity for Ministers to be both right and popular—a novelty on both counts at the moment—but they are still insisting that roads schemes go ahead all over the country in the face of desperate opposition from local people, and are not going ahead with some schemes that are vital for economic development, the safety of passengers and would be clearly welcomed by local people.
Those vital schemes include converting the Al north of the Tyne into a dual carriageway and ending the constant deaths that occur there, and to make the final few miles of the road to Dover docks into a dual carriageway. That would be welcomed by virtually everybody concerned, it would be good for the economy of both places and it would be popular. I hope that the Ministers will not use the Budget reduction as an excuse for further delays in those vital road-building schemes.
The Secretary of State for Transport announced today that he will be researching electronic road pricing for motorways. He has been seeing too many re-runs of "Doctor Who". That proposal has nothing to do with transport: it is just another Tory tax racket. I would not be surprised if they came up with a system that exempted Rolls-Royce drivers from having to pay. After all, the Chancellor's new airport tax exempts executive jets, as I am sure he will confirm.
If the Chancellor's little friend introduces motorway tolls on the road network, it is worth noting the list of the advantages of coming to Britain that was issued today by the British Tourist Authority. Item four of the 15 strengths 1256 is the high-quality, toll-free road network. That proposal will not do a lot of good. Did the Department of Transport or the Treasury consult the tourist industry or anyone before they went ahead with these propositions?
There is another aspect which the Chancellor did not mention in his Budget statement. He has raised tax on bus transport. Operators will have to pay the insurance tax, which will be passed on to the passengers. It does not stop there. The Chancellor put 3p a litre on road fuel duties and said that the duties would rise by 5 per cent. each year. What he did not mention—I cannot imagine why—was that the fuel duty rebate to local bus operators is not to be uprated, this year or any other year.
Perhaps he did not consult the Bus and Coach Council on the likely effect of this scam. The council has been in touch with me to say that its members are up in arms. The operators will pay more and more duty. They say that that will hit disabled and elderly passengers, because work to install wheelchair lifts and low floors will become more expensive relative to takings. Services in rural areas will suffer, orders for new vehicles are likely to be put back or cancelled, and fares will rise. It is like putting 2 or 3 per cent. VAT on public transport by the back door. It is entirely typical of the way in which this Government behave.
There is another transport aspect to the insurance tax. It is believed that about 1 million people do not insure their cars. A tax will be added to premiums that people do not want to pay in the first place. I freely acknowledge that such people are law breakers, but I know that we try to discourage and not to encourage law breaking. There is a danger that the imposition of that tax——
§ Mr. Dobson
The Secretary of State says that this is feeble stuff. If he thinks that it is feeble to say that we are in danger of increasing rather than decreasing the number of people driving uninsured vehicles around Britain's roads, there is something wrong with his own feeble mind. But he is only a lawyer, so I suppose that he can be excused. That also excuses the Chancellor of the Exchequer.
The Budget has done nothing for anybody in its impact on transport. It will increase the fares on trains, boats, aeroplanes and buses; I recognise that that does not rhyme, which is why the words were not used by Burt Bacharach.
The Budget will increase the cost of moving round the country and, as ever, the bulk of the increase will fall on the people who are worst placed to meet that cost. Well-off people will not suffer from those increases. Badly-off people will suffer from the increases, and many very badly-off people will suffer from the transport aspects of the Budget, just as they have been singled out by the Chancellor to bear the brunt of the Government's incompetence to date.
One of the most famous Tory Prime Ministers of all time, Benjamin Disraeli, was born in my constituency. He recognised—and convinced the 19th-century Tory party of this—that there was a danger of having a wholly alienated class of people who felt that they had no stake in the country. He said that it was vital that everyone was given a stake in the country.
The present Tory party is increasingly creating an alienated group, especially an alienated group of young people who feel that they have no stake in the country and 1257 that the Government have no commitment to their future. We allow that group to grow at our peril, and at the peril of our democracy.
§ The Economic Secretary to the Treasury (Mr. Anthony Nelson)
I reject entirely the vision of despair for this country described by the hon. Member for Holborn and St. Pancras (Mr. Dobson). His speech, which was a rumbustious conclusion to a debate that started with jobs and ended with tubes, was nevertheless an important contribution. I am the first to acknowledge the importance of railway services and transport services more generally to the people of London.
Anyone who heard the hon. Gentleman talk would not have thought that we have a planned expenditure on transport of some £17 billion over the next three years; that we had a planned investment programme of £15½ billion; that there was a core London Transport investment of £1¾ billion; plus £1.3 billion on the Jubilee line, plus the docklands extension, plus the Heathrow express. One would not have thought that £3 billion was being spent on the railway, of which £2 billion was public money.
What seems to besot the hon. Gentleman is the matter of who pays: if it is public money, it is good investment; if it is private investment, it is not on. What matters to rail users is the delivery of the services and the infrastructure. That is happening.
My right hon. and learned Friend the Chancellor of the Echequer opened his Budget statement by saying that his priority was to develop and sustain the recovery and generate a climate in which investment, jobs and growth were sustained and increased. That is at the heart of what all Conservative Members have reiterated in their speeches on the Budget. The fact that he put up front the priority of jobs along with growth was a significant signal on a day that started with a speech by my right hon. Friend the Secretary of State for Employment.
We all acknowledge the importance of getting people back to work and the unacceptability of the present high level of unemployment. Little mention was made, other than by my right hon. Friend, of the more positive effect—that there are 1.3 million more people in employment than there were 10 years ago. Nevertheless, it is important that we strive to create more job opportunities for those currently unemployed.
That is what many of the programmes and changes proposed by my right hon. and learned Friend the Chancellor should bring about. It was therefore appropriate in the debate that the first Conservative contributor was my hon. Friend the Member for Bedfordshire, South-West (Mr. Madel), who has taken such a long and abiding interest in employment issues. He raised several points during his speech, particularly with regard to the new heating arrangements, the new subsidies and grants that will be available to help people with insulation.
My hon. Friend asked about windows, and we shall certainly take on board his point. As I understand it, the scheme was not intended to apply to that, but it should, because it may cover the whole cost and leave people with more resources to pay for other insulation methods. The importance of the scheme is that it will benefit half a 1258 million households and will be available not just to means-tested pensioners but to pensioners generally. That is a significant allocation of public money.
My hon. Friend also raised the issue of Maxwell, and as the Minister with responsibility for financial services, I shall take careful note of what he said. We are all extremely concerned with the plight of those who have lost money. That is why the Government allocated moneys on a short-term temporary basis as bridging finance until the restitution of assets can be made available. I appreciate all that my hon. Friend has said today, as I did his comments on fuel duty, the apprenticeship scheme and venture capital trusts.
The hon. Member for Motherwell, South (Dr. Bray), who has written to me a number of times, raised the interesting question of the Treasury model. He put forward, as on previous occasions, the need for policy optimisation and the need for the formulaic approach of the model to be changed to take account of the policy maximisation theories and approaches that he has expounded.
We have reviewed many of the behavioural formulae that comprise the Treasury model and we have completed that process. As the hon. Gentleman will know, there is a regular process for re-examining that. We are open to suggestions. I have asked my officials to look carefully at his representations and I have offered him the opportunity to talk directly to Treasury officials. I hope that he will avail himself of that opportunity. I suspect that he and I may be in the minority of hon. Members who have taken the opportunity to use the Treasury model that was, and I hope still is, open to Members of Parliament. I agree with the hon. Gentleman about the importance of providing a service and a way to deliver indicators and statistics that can provide a firm foundation not just for Government economic policy but for Opposition parties, allowing them to attack and question the Government at any time.
The hon. Gentleman asked why we did not have an exchange rate policy and why there was no monetary policy. My right hon. and learned Friend the Chancellor spoke of monetary matters during his statement, but foreign exchange currency rates are not a prime objective of policy. They are undoubtedly an assumption that we have to build into the mechanism, and we do that.
§ Dr. Bray
My central point was that if the Chancellor wants an efficient exchange rate and monetary policy—I was not questioning whether he has one—he needs to define it. That point was made by Sam Brittan in the Financial Times today. The Chancellor will find that if he does not deal with that issue now, he will have to do so at a later date, and I was offering him a way forward.
§ Mr. Nelson
I am grateful, but, for the reasons which I have given, that is not our approach.
My hon. Friend the Member for Erith and Crayford (Mr. Evennett) gave a warm welcome to the Budget. That he is very much in touch with his constituents was shown by the examples and representations that he quoted. I am grateful for his firm support of most of Tuesday's Budget statement. I particularly noted what he said about small businesses and about the package of benefits available, especially to elderly people. Like other hon. Friends, he mentioned the pensioner's guaranteed income bond. That is an important new facility available to those who want a regular monthly income. 1259 The hon. and learned Member for Montgomery (Mr. Carlile) spoke about the enterprise investment scheme and the venture capital scheme. I regret the fact that he called it a confidence trick——
§ Mr. Nelson
I shall be dealing with the pensioner's bond in more detail in a moment.
The two vehicles for investment should be important contributors to the liquidity of new businesses and we shall provide front-end tax relief for the enterprise investment scheme, but it will be at 20 per cent. instead of 40 per cent. One of the problems with offering the higher marginal rate for the EIS was that it would have facilitated round-tripping for business angels—those who take an interest in the business of the company and pay themselves a salary out of it. We hope that by instead allowing relief against losses, the lower rate of relief on capital will prove to be extremely attractive.
My hon. Friend the Member for Bromsgrove (Mr. Thomason) raised an interesting but much wider issue—the short-termism of our financial institutions, of Government and of investors generally. My right hon. and learned Friend the Chancellor has asked me to conduct an inquiry into that issue over the next seven months. The industrial finance initiative is two months under way, and the objective is to look at the financing of industry by all institutions and at the liability side of the balance sheet to see whether there is the short-termism to which my hon. Friend referred and whether supply changes can be made to increase the liquidity of capital to the manufacturing base, to help to start up companies and to ensure the reinvestment of capital.
I suspect that part of the answer will be that when one has a plateau of much lower levels of inflation and interest rates, there will be much more longer-term investment and one of the key components of the extent of overdraft finance and short-term investment interest has been the seeking of quick returns against rising and high levels of inflation. If we can deliver what the Government are determined to deliver—not just lower interest rates and lower inflation but a sustaining of those low levels—there is a real prospect of behavioural changes in the attitude of investors as well as of many others.
The hon. Member for Wallasey (Ms Eagle) spoke about massive tax rises. She got very excited and referred to Treasury Ministers as rampant lunatics at the driving wheel of the economy. We in the Treasury are modest men, cautious and conservative, and I did not recognise her description of us. However, when she picked up the autobiography of my late noble Friend Lord Ridley, I realised that she had been reading too many autobiographies, which perhaps accounted for her rather colourful description of us and of others.
My right hon. and learned Friend the Chief Secretary acknowledged yesterday that the Budget announced some tax increases above those that were announced earlier this year.
§ Mr. Nelson
It is a matter of fact. There is no revelation in that. It is a serious Budget to address a serious situation. As my right hon. and learned Friend has said to the people of the country, unless we face up to our prime responsibility of addressing the state of the public finances, there is little prospect of sustaining the same level of personal prosperity or public services in the future. It is because of our desire to do both that we are determined to address the state of our public finances now.
My hon. Friend the Member for Aylesbury (Mr. Lidington) spoke about transport policy—about the A418 in his constituency and about many other local and national issues that affect it. I particularly appreciate what he said about publicly financed projects such as the west coast project, the air traffic control project in Scotland and the docklands light railway. Those will be important projects, not recycled ones, and together with many other projects will bring real jobs, massive investment and lasting improvements to infrastructure.
My hon. Friend the Member for Aylesbury also welcomed the small business package of measures. He made telling points about the issue of free trade and about the importance of Europe's adopting a free trade stance and not becoming protectionist against the free trade occurring in the Pacific basin and elsewhere in the world.
The hon. Member for Hampstead and Highgate (Ms Jackson)—who cannot be with us this evening—raised some points about London transport. I have already touched on those matters.
My hon. Friend the Member for Cirencester and Tewkesbury (Mr. Clifton-Brown) made important suggestions, particularly with regard to small businesses. I am grateful for the welcome that he gave to the package of measures that my right hon. and learned Friend announced. We will look carefully at the detailed points that he made and I will write to him about those matters.
It was left to the hon. Member for Nottingham, South (Mr. Simpson) to do what no one else on the Opposition Benches has done. Despite our pleadings and challenges to come clean, not once has any Labour Member given the true alternative Budget strategy of the Labour party, other than the hon. Gentleman. I am grateful to him, and I appreciate his honesty and his coming forward with some ideas. Are those ideas the official Labour party policy?
The hon. Member for Nottingham, South said that he was in favour of a 50 per cent. tax rate for those earning more than £50,000 a year, and that that would raise some £4 billion. He was in favour of the top whack of rates and taxes on empty commercial properties, which would raise an indeterminate amount. He said that he was in favour of slashing the defence budget—not down to the European average, which would slash £8 billion off that budget, but down to the German level, which would slash £13 billion off our defence budget. It is at least honest. The hon. Gentleman at least made a suggestion, which is more than can be said for any Opposition Front-Bench spokesman. I want to know whether that policy is more widely held.
The hon. Member for Nottingham, South said that there should be a tax not only on the flights of people on holiday but on the flight of capital. That sounds as though he is urging the reintroduction of exchange controls. Is that the official stance of the Opposition? If so, we want to know. We want to know what the Opposition estimate the effect of that would be on inward investment and the creation of jobs, for which they so often call. 1261 My hon. Friend the Member for Surrey, East (Mr. Ainsworth) said that the deficit had built up because the Government had accepted their responsibility to the most vulnerable in our community. Goodness knows, there have been enough calls for that from the Opposition. We have delivered it to those who voted for it and have stood by them in difficult times. We are not ashamed of having fulfilled that commitment, any more than we are of saying, in improving times, that we have to address these problems.
In response to that, the hon. Member for Kingston upon Hull, East (Mr. Prescott) made an interesting but derisive speech about the Government's motives behind the Budget. He said that the Budget would do nothing for jobs. He described it as a Budget for the City casino. He derided it, holding up announcements about the success with which my right hon. and learned Friend's strategy has been received outside the House. It is good news if my right hon. and learned Friend's Budget enjoys the confidence of international and domestic investors. The fact that the stock market has risen by 150-odd points in the last week and that long-term bond yields have come down is very good news indeed. The hon. Gentleman should welcome that, and I entirely reject his approach to the City and business, which usually comes out of the closet when he is pressed.
Opposition Members' true colours shine through in the deep prejudice that they bear towards business and enterprise and the financial services institutions. A recent remark by the hon. Member for Holborn and St. Pancras went to the heart of the matter. This is what he said about business and company directors:Yes, it's the politics of envy. We're envious of their wealth. These people are stinking, lousy, thieving incompetent scum.
That is the attitude of one of the Opposition spokesman——
§ Mr. Dobson
As a man who generally pursues the truth, may I put the record straight? In the newspaper piece, of which that was a snippet, I was referring to people who were very rich, had very large houses and very big cars and went on fancy holidays, but who paid their staff poverty level wages and supported the abolition of wages councils. I still regard those people as thieving scumbags.
§ Mr. Nelson
The hon. Gentleman must take up his argument with The Sun rather than with me, but the words are typical and descriptive.
The theme running through much of the debate has been the importance of business as the generator of jobs and employment. I hope that hon. Members on both sides of the House will acknowledge that, if we are to create greater prosperity through employment and through business, three things are essential: first, we need that elusive ephemeral trait of confidence and stability that has been lacking; secondly, we need low inflation and low interest rates, both of which have now been delivered; and, thirdly, we need as little taxation and as little regulation as possible on the income and employment-generating sector of the economy. The Budget delivers all three.
What of the Opposition's response to the Budget? What was the response of the hon. Member for Dunfermline, East (Mr. Brown) on television last night? The hon. Gentleman went, as usual, as the disciple of despair—an ambassador for Armageddon. He stood up bleakly in front 1262 of the British people and trotted out figures that brought the country down again. He brought out a colourful bar chart showing selective dates and figures. [HON. MEMBERS: "Come on!"] Oh, yes, they were very selective figures to show manufacturing output in Britain over 14 years. What the hon. Gentleman did not tell us was that had he taken figures from a comparable period from 1982 to 1992—from trough to trough—the picture would have been entirely different. Over that period, this country has had much higher manufacturing output than Germany, France or Italy. But the Opposition do not want to know the good news. They want to run British industry and British manufacturing down.
The business package announced in the Budget was an essential generator of prosperity and hope for the small and medium-sized enterprises at this stage of recovery. Let me reiterate some parts of that package: the increase in the corporation tax thresholds of the smallest companies will benefit some 30,000 companies and the foreign income dividends scheme, depending upon the behavioural habits of income retained in companies, will be worth some £100 million.
§ Mr. Nelson
I will come to jobs—the profitability and cash flow of British industry are important for jobs. The uniform business rate concession will be worth some £105 million. National insurance contributions will bring a net benefit, even after the additional cost of statutory sick pay changes. The late payment proposals will have a significant impact on the cash flow of industry.
The importance of the changes is that they will add to the liquidity of, and the investment in, British industry and business. That will create jobs in large and in small companies.
§ Mr. Nelson
I can tell the hon. Gentleman that there are 2.7 million businesses, two thirds of which are small businesses. Three quarters of the employment in this country is in small to medium-sized enterprises. The combination of a reduction in interest rates and that package of measures will feed directly through to cash flow and give employment opportunities. There is no point in the hon. Gentleman going on about it—it is good news for British business. If he does not think so, British business does.
The Budget will not only promote enterprise and encourage investment but seek to reduce the red tape on business.
§ Mr. Nelson
The hon. Gentleman may think that it is waffle. I tell him to ask business men, who welcome the changes which will make a big difference to them. The changes with regard to audit requirements will benefit about 500,000 companies and will significantly reduce costs and provide employment-creating resources.
The increase in the VAT threshold to £45,000 will benefit 75,000 businesses. In addition—this has not received much comment—there is the change in arrangements for assessing national insurance contributions and income tax, which companies and businesses now have to work out laboriously; those arrangements will 1263 be streamlined to make that work easier. I have referred to those costs to industry that prevent jobs. Our measures will release resources that will help employment.
In the final two or three minutes available, I will return to the speech of the hon. and learned Member for Montgomery, who spoke for the Liberal Democrat party. At least his party came up with an alternative Budget in November, but it seems that the Liberal Democrats have got away unscathed from a lot of the criticism which has been rightly heaped on the Labour party.
The Liberal Democrats seem to face all ways. They will promise the earth to whatever audience they speak to, and they are a soft touch for every lobby. The party will not come clean on the fact that its alternative Budget proposes 1p extra on the standard rate of income tax and 4p extra on the upper rate. The party would impose a payroll tax which would be levied at 2 per cent. There would be increases in national insurance contributions. The Liberal Democrats promise higher taxes—we know where we stand and what impact that would have on businesses. Certainly, we know that that would not help employment.
We know that, as well as being a higher-taxing party, the Liberal Democrats are also a higher spending party. One issue that party totally forgets is the amount of the deficit. It simply will not face up to the responsibility of tackling the deficit. Perhaps that is not wholly surprising in view of a speech by the right hon. Member for Berwick-upon-Tweed (Mr. Beith) in Torquay in September. He said that there was no point in being mesmerised by debt, and that there was a strong case for limiting and targeting additional borrowing. If the right hon. Gentleman thinks that, he is financially and economically illiterate. He is also irresponsible with regard to the affairs of the nation.
Like his party, the right hon. Gentleman does not have a clue about how to run the finances of the country. The party has no prudence and no responsibility when it comes to face up to the high and rising deficit. It is not prepared to announce how to deal with it.
§ Mr. Nelson
I am not giving way. The hon. and learned Gentleman had his innings earlier.
The Liberal Democrats go up and down the country promulgating every policy which the party thinks will appeal to whichever audience it is speaking to at any one time. It would have us believe that, on the one hand, it will face up to the responsibility of sound husbandry of public finances and, on the other hand, it will not put up taxes. In addition, it has a magic way of increasing Government spending.
The Liberal Democrats have a fraudulent policy, a confidence trick and a stance which is wholy untenable. 1264 The electorate will look at them and examine the paucity of their proposals. The electorate will look at the black hole of the Liberal Democrats' economic policy and will understand that the party does not offer an alternative. Far from it—it offers the prospect of further job losses and a much higher tax burden. The party's preferences for second-guessing on public expenditure do not offer a way forward.
The Budget addresses the state of public finances. It does not take an easy or opportunist way out by seeking to please all opinions with money which the country cannot afford.
My right hon. and learned Friend knew when he framed the Budget judgment that, unless we were prepared to face up to tackling that deficit, we would run into the problems of a credit crunch at some stage in the future, when markets simply would not be prepared to finance a rate of borrowing of £1,000 for every man, woman and child in this country. He knew that unless we faced up to that, our public sector borrowing requirement would be an increasing proportion of our gross national product.
The vote of confidence, the money that has flowed into Britain and the jobs that will come from it come from people who recognise that we are on the right track, that we are addressing the issues and that we are living up to the necessity of reducing the amount of loans as a proportion of GNP. That is the responsible way forward. That is the way in which the Conservative party will ensure not only that we have electoral support——
§ It being Ten o'clock, the debate stood adjourned.
§ Debate to be resumed tomorrow.